Daniel Zhao of Hosane Auctions controversy.

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

  1. Pandacollector

    Pandacollector Active Member

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    Neither of us has read the contract between the German dealer, and the first buyer. Title could have already been transferred according to the contract. Other reasons are possible, as well.

    Best wishes,
    Peter Anthony
    China Pricepedia
    http://www.pandacollector.com
     
  2. yennus

    yennus Well-Known Member Silver Stacker

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    Even in the event that the American dealer had title: "The argument would be that Zhao was in the clear because he was a BFP (i.e. even though he bought the coin from someone who didn't own it, the real owner was cut off from recovering from Zhao because Zhao was a BFP). The BFP concept also applies to the person who bought from Zhao - i.e. the American can't go after the auction winner because the winner was also a BFP." (anonymous Panda lawyer)

    But the American dealer can go after the German dealer.
     
  3. Pandacollector

    Pandacollector Active Member

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    Your theory of BFP may not hold up in court. Neither of us (nor anonymous Panda lawyer) know all the facts, or how a court will interpret them. The American dealer could go after the new owner of the coin. He might get a judgement for return of the coin in Germany, and try and enforce it in China, or if the coin ever appears outside of China. Anonymous Panda lawyer also refers to the type of title that Zhao and the high bidder have as, "voidable." That suggests to me that it can be voided, taken away, that it is not ironclad. There are many possibilities. IMO, it was a serious mistake to auction the coin before all title claims were settled.

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

    P.S. Being a compulsive person, I looked up Bona Fide Purchaser in some references. From the looks of it, as a non-lawyer, there are indeed ways to challenge a BFP defense.
     
  4. yennus

    yennus Well-Known Member Silver Stacker

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    I'm not a lawyer nor judge, but from what I've read, this is a fairly easy case, where the German dealer made a huge mistake. The full liability rests on the German dealer, not on the Chinese dealer. Instead of going after the Chinese dealer, the focus should be on the German dealer.

    "The BFP concept only comes into play if title passed to the American and therefore the German was selling something he did not own. However this does not mean that Zhao doesn't get any title he still gets possessory title by the mere fact that he possesses the coin. Possessory title is good against the world, except anyone with superior title which is only the American. But unfortunately, the law (and equity) intervenes to cut off title to the American because of the BFP event." (Anonymous Panda lawyer)

    >>>
    "In relation to U.S law, not only has the concept [of BFP] been part of case law for a very long time (see first paragraph of http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?art.icle=1078&context=flr), but the concept has also been codified in statute. The US Code applies it directly to patents as a form of (intellectual) property: http://www.law.cornell.edu/uscode/text/35/261. In relation to chattels (goods), the principle is codified in the Uniform Commercial Code: http://www.law.cornell.edu/ucc/2/2-403.html.
    ...
    "As a general rule, an innocent purchaser for value and without actual or constructive notice that [the] vendor has secured the goods by a fraudulent purchase is not liable for conversion." (5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, 716, p. 1040.)"
    <<<

    From the facts presented by Nick Brown, Zhao did have title, and was within his legal rights to auction the coin. The subsequent buyer is similarly protected - unless it can be established that the coin was stolen - which it evidently was not.

    Considering that there is no contractual obligation between the new owner of the coin and the American dealer, I don't see any means by which the American dealer could go after the new owner.

    My guess is that a case between the American dealer and German dealer is more likely to succeed, than a case between the American dealer and Chinese dealer.

    Fortunately/Unfortunately I don't have a relationship with any of these parties. Nevertheless, it would be interesting to see what happens.
     
  5. Lim

    Lim New Member

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    Can the buyer of the coin goes after Zhao if the coin is proven that it belong to the Amercian Dealer ?
     
  6. yennus

    yennus Well-Known Member Silver Stacker

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    Technically, even up to this point in time, the title for the coin has not been formally challenged (a blog write up does not constitute a formal challenge). Which reinforces the view that Zhao really did have title and was within his rights to auction.

    The submission of legal affidavits, etc, by the German and American dealers should have been replaced with legal proceedings.

    Formal legal proceedings may have stopped the coin from going to auction.
     
  7. yennus

    yennus Well-Known Member Silver Stacker

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    From the appearance of it, the buyer of the coin is the new full and legitimate owner of it - even if the coin is proven to belong to the American dealer.

    "As a general rule, an innocent purchaser for value and without actual or constructive notice that [the] vendor has secured the goods by a fraudulent purchase is not liable for conversion." (5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, 716, p. 1040.)"
     
  8. thatguy

    thatguy Active Member

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    to sum up this thread in a picture
    [​IMG]
    :p
    OR
    [​IMG]
     
  9. Pandacollector

    Pandacollector Active Member

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    Yennus,

    I am out of time for our enjoyable discussion. As a last contribution, I looked into German property law and can confidently say that it differs from English law in how property rights can be transferred. For instance, the BFP concept exists but is limited, "as a basic principle, assignees cannot acquire a claim or other non-chartered rights from an apparent holder."

    I would also like to raise the possibility that a court may find that Mr. Zhao gained control of the coin through fraud. It is alleged that, when asked, his representative provided the German dealer with a grossly and deliberately inaccurate market value in order to buy the coin cheaply. So, to my mind, your certainty that Mr.Zhao's had clear ownership of the coin may not be correct. If fraud is found than that may open up other legal issues, as well.

    The German dealer does not come off well, either, and his financial liability potentially could exceed the auction price of the coin. As I see it his actions are the cause of the entire mess, and he passed up his last opportunity to bury his mistakes quietly.

    The person I feel sorriest for is the bidder. As I said before, he bought himself not only a coin but a headache. At the least his ability to resell his prize is compromised for the time being.

    Anyway, thanks for the engaging back and forth. It seems fitting that this coin's number is 19, a prime number that is not divisible except by 1 (and itself). The rights to this coin are like that, and in the end only one person will own it all.

    Best wishes,
    Peter Anthony
    China Pricepedia
    http://www.pandacollector.com
     
  10. jc888888888

    jc888888888 New Member Silver Stacker

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    Wow.......... If I ever need representation in a dispute ,I know two gentleman that can help me:) lively and enjoyable discussion thanks guys Joe
     
  11. yennus

    yennus Well-Known Member Silver Stacker

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    Thanks PandaCollector,

    indeed, it has been an entertaining and enjoyable exchange, a bit like chess. Thanks for your time. I really appreciate your thoughts - especially as I see the situation very differently.

    I'm really glad that this serious discussion could take place without trolls turning it into another train wreck. I'm incredibly grateful that the maturity in these forums has come a long way in the past year.

    I can't comment on German law. Hopefully I'll get to make friends with a German lawyer or judge in the near future :)

    In regards to Zhao obtaining the coin through fraud by offering a price below market value, legally I don't think that would go well for the German dealer. It was the German dealer's responsibility to know the value of his coins, after all, it is common for dealers and people to sell items at vastly cheaper prices for a multitude of reasons. Let us also not forget that numismatics is a subjective field, one person's treasure may indeed be another person's trash; some people outside of the modern Chinese Coin field may even have priced the coin at spot (or less). The German dealer's case also isn't helped by the fact that they requested the Chinese dealer for a price - and they accepted his price.

    The current owner, the person that won the bid, and is the current possessor of the coin, I think is completely in the clear - as the current owners title would not be at risk in Australia, or America, or China due to BFP. This remains the case even if Zhao obtained the coin by fraud (which I don't think can be established) - because the new owner would definitely be protected under BFP (in my opinion).

    I don't really think the title will be contested formally from this point on. The time to make legal proceedings was before the auction, as there existed a connection between the German dealer and the Chinese dealer. Now there is zero connection between the current owner and the German dealer.

    In my mind, the German dealer, as nice as he or she may be, is central to this mess, and should bear the responsibility completely. The German dealer should bear the responsibility of not only compensating the American dealer for breach of contract, but should also intervene to assist the Chinese dealer for all the bad publicity his/her mistake has brought Zhao. A coin purchase of any value shouldn't be this much trouble - it's also unethical to try to pin their mistakes on the Chinese dealer - who under the presumption of innocence was a genuine purchaser and held no obligation to any other party.

    You're right about the coin, it certainly has been made much more unique! :)

    Thanks again! Hopefully we can catchup at another coin expo or auction.
     
  12. Melchisedech

    Melchisedech New Member

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    Hi everyone, i have an off topic question concerning hosane. Maybe somebody can give me a contact to an auctioneer!? I am a private wine collector based in shanghai and would like to consign some wine.
    I would appreciate any advise!

    thanks
     
  13. yennus

    yennus Well-Known Member Silver Stacker

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    Hi Melchisedech, welcome to the Panda Forum and Silverstackers; and thanks for your first Silverstackers post!

    Yes, you're off topic. In the future please create a new post.

    Nevertheless, here is the Hosane website.
    http://www.hosane.com/

    If you contact Stephanie, who speaks both English and Mandarin, I'm sure she will be able to point you in the right direction.

    [email protected] <-- she is one of the managers for the Gold and Silver Coins of PRC auction department.
    [​IMG]
     
  14. Melchisedech

    Melchisedech New Member

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    thank you very much for your quick reply!
     
  15. yennus

    yennus Well-Known Member Silver Stacker

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    Here to help :)
     
  16. comeaux

    comeaux New Member Silver Stacker

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    Amen to that brother the forum has really matured in the last year and grown as well with many knowledgable and contributing members.
     
  17. goldpanda

    goldpanda New Member

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    Just found the other side of story from Hosane's latest announcement
    http://www.hosane.com/newsdetail.asp?newsID=469&LANG=eng


    A 1998 Spring Festival 5oz Gold Coin at Hosane's 2012 Spring Auction

    It's known to all that, to prove something in question, legal procedures must be taken. The fact is, it's something unusual and completely unethical in the numismatic community that somebody, in our industry of numismatics, tries to circumvent the law with the "help" of others by making others take liability and encroaching someone else's ownership of property in attempts to "help" a greedy dealer group.

    As a matter of fact, such an important, invaluable 5oz gold coin (please note, GOLD COIN), was actually "missing" for over one year without being noticed. Is there any hidden reason? That's what the people involved in the transaction should know.

    The truth is, Hosane got in touch, quite timely, with this US dealer unwilling to mention his name (Why he's unwilling to state his name? Did he has any common interest with somebody?), hoping he could provide certain legal documents to prove the ownership of the coin, some documents issued by court, certificate of hand-over or certificate of payment. Instead, what Hosane received was an inventory, a quote list, and a long statement. The US dealer stated that he "has" the ownership of the coin without any legal documents. As an auction company authorized by the law, Hosane is quite experienced in handling any disputes regarding ownership. In fact, such case was a very common civil dispute for auction companies, which there're regular procedures to follow.

    In fact, this coin never went missing. It's always with the German dealer. Probably the transaction was stopped due to conflicts caused by price or payment. Did any problem occur in the transaction, resulting in the US dealer's failure in getting this coin legally? Almost all Chinese numismatic collectors knew several versions of the story.

    The fact is, this coin went "missing" without any written notification to either Hosane or Zhaoonline. All Chinese dealers would feel absurd about the issue! Is there any case filed and public written notification made for so important a coin went "missing" for so long? Definitely not!

    Actually, this coin became invaluable long time ago. That's a CHINESE FIVE OUNCE GOLD COIN. How could professional personnel of a numismatic company think a Chinese 5oz gold coin of small value? At that time, the coin was worth EUR 100,000. That employee hadn't even seen anything so valuable in his life, how could "not realizing its extreme value" as claimed be justified? Furthermore, it's told that the person who handled and sold this coin is the chief official of this German company. Interestingly, further investigations revealed that not only this coin, but a series of the so called "missing" coins showed up on Ebay or at the German market.

    The truth is, the US dealer only purchased part of the items in the coin collection of the Germany dealer (please note "PART"), total value around three million US dollars, while their actual selling amount by the US dealer was over ten million US dollars. Does everyone think the US dealer's price reasonable? It's even more ridiculous that a slander occurred. Mr. Zhao has never got involved in the purchase of this coin, let alone meeting the German dealer. Actually, Hosane's coin auction department comprises just 5 people, and holds up to 5% of Hosane's business volume. It highlights artworks and antiques. As a CEO who has over 300 employees and whose business involves 700,000 lots hitting over 100 million US dollars annually, Mr. Daniel Zhao's not even possible to intervene in the auction of an item at such level. It's after the US dealer contacted Mr. Zhao, hoping that "help" may be offered to let him take the coin away immediately that Mr. Zhao asked his employees to report to him what really happened, for the US dealer had known Mr. Zhao 15 years ago. We can't help suspecting that someone got Mr. Zhao involved intentionally.

    In fact, Hosane never confirmed what the US dealer said would be effective once he acknowledged the ownership of the coin. Instead, very strict legal documents were required as a backup. Would you hand over all your properties to someone else should he acknowledges that they belongs to him? The statement of the people with the conflicts of interest is pointless. And another problem is that so far the US dealer is still unable to provide any proper legal documents to prove that he has the ownership of the coin. He couldn't bring any lawsuit to any German or Chinese court to claim the ownership of the coin either. Why? That's because Hosane has consulted many German and Chinese legal experts and was told that this dealer was actually insisting on seizing the property of someone else's. Although this coin changed multiple hands, its ownership by Hosane's consignor was legally acknowledged. That's the reason Hosane did not stop auctioning this coin. One thing should also be clarified is that Hosane never buys any coins. The Spring Festival gold coin was consigned to Hosane by an investor. Nick's blog was misleading folks into believing that Hosane purchased the coin.

    Actually, the inventory provided was full of loopholes. Many gold and silver coins in the inventory (including the other 5oz gold or silver coins) were listed on Ebay. The fact is, the Germany dealer stopped supplying the US dealer and started legal sales on Ebay. Would the US dealer go to a German court with a statement saying all the coins in the inventory but listed on Ebay belong to him? Hosane is a platform similar to Ebay. It seems that the US dealer and Mr. Nick Brown should sue Ebay for covering the seller and the buyer in trading so many coins "in a group of many pieces". If Mr. Brown and this US dealer unwilling to state his name send a letter like this to Ebay, Hosane will absolutely respect Ebay's decision!

    It's more ridiculous that any of the certificates requested-certificate of hand over or certificate of payment-was always unavailable! There's no legal basis of ownership transfer, as neither certificate of hand-over nor payment could be provided. Noticing this coin becoming more and more valuable, they just wanted to share the interest by taking away that of the collector.

    Actually, if this coin really belonged to the US dealer, measures should have been taken to get it back in either Germany or China by legal means. Why not take any legal measures, while "offer $100,000"? It's unreasonable to buy back his "own" item instead of bringing lawsuit. Here everything gets clear that they did not have the ownership. They're clear that no legal support would be on their side, no matter it's German or Chinese law. What they really knew was the actual value. They just wanted to share with Hosane's consignor the interest brought by the appreciation of the coin. Hosane should, not only ethically, but also legally, protect the consignor's interest.

    As we can see, such things only happened with those two American dealers. It's believed that they will never happen with other US or Chinese dealers. Even though such things happened, Hosane was still communicating with the US, German dealers and the consignor so positively, with hopes that each party will feel satisfied after mediation. Unfortunately, it's ridiculous and terrible that the US dealer actually threatened Hosane by an email that they have the power to destroy the reputation of Hosane and Mr. Daniel Zhao. Since it received the threatening statement from the US dealer, Hosane has ceased any contact with the US dealer. Although we only know a little about the US numismatic community, we firmly believe that Hosane will never compromise before any threat. Hosane would never get involved in the numismatic community if it is forced to be on some greedy US dealer's side to harm the interest of the consignors.

    Zhaoonline and Hosane are well known in Asia and Europe. Mr. Brown's attempts to slander and stain their fame will be deemed nonsense by most collectors!

    Why was Mr. Brown taking some much time and efforts to fabricate the so-called evidences in order to slander Hosane? It's because there's interest. They can do anything for it! Mr. Brown, in collaboration with the US dealer, cheated the coin collection out of the German collector. Every Chinese coin collector knew what the story really was.

    The fact is, neither can Mr. Brown threaten Hosane, nor he can threaten the Chinese numismatic community. We really hope that he can tell us the terrible shill bidding story in which he bid on his own consignments together with the US dealer sitting in the first row in the Hong Kong auction, and how he cheated the coins out of the German collector.

    Actually, everyone is clear who's unethical, the person who plundered someone else's ownership; who sought dominating world numismatic community; who used illegal measures to threaten others; and who said to someone else, "Your coins are mine" without any legal basis!

    Perhaps both US dealers got hurt in the transaction with German dealer; however, it's not justifiable that the US and German dealers tried to force Hosane into submission by throwing mud at it. Hosane never reveals any information of its customers or that of the mediation unless required by the law. Hosane also tried not to let the problem of Nick and the two dealers go public even if it's hurt so deeply. Complete confidentiality is a very important code of conduct for all auction houses. Folks who already read Nick's blog may also notice that it's weird and questionable that Nick kept mentioning Mr. Zhao's name while left the US and German dealers in shadow.

    Finally, we thank Nick very much for letting US numismatic collectors know Hosane (www.hosane.com) and Zhaoonline (www.zhaoonline.com). Perhaps not so many US folks knew them before, but now, people may think, the companies Nick took huge efforts to fight with are great companies and worth exploring. In the end, people will find out that, what Hosane and Zhaoonline built up for decades suits every one-being FAIR, SQUARE and LEGAL!
     
  18. Pandacollector

    Pandacollector Active Member

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    For starters, I believe just about everything in this statement that concerns Mr. Nick Brown is inaccurate. To the best of my knowledge (and I've heard quite a bit) Mr. Brown had no role, or financial stake, in the purchase of the disputed coin from the original collector. That was entirely a matter between a German dealer and a German collector. Furthermore, I don't believe that Mr. Brown has, or ever had, a financial interest in the coin. It was ordered and paid for by a different American dealer. Based on what I've been told by several sources, the suggestion that Mr. Brown somehow cheated the German collector in any way is totally, 100% wrong.

    About the only item in this statement that I agree with is that the dealers (both German and American) who paid for the coins should stop being anonymous, and come forward. I will leave the rest of the public discussion to the parties directly involved. I will also put a link to this statement in the next China Pricepedia so that people can read it and make up their own minds.

    Hosane may be right that any publicity is good publicity, but in this case it looks to me like it will take a lot of washing to get all the mud off everyone before this story is over.

    Best wishes,
    Peter Anthony
    China Pricepedia
    www.pandacollector.om
     
  19. low

    low New Member

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    There is no Chinese version of this statement.
     

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