## Facts

- Haley & Steele, Inc. operated a Newbury Street art dealership that dealt in valuable artwork (including nineteenth-century prints).
- Private individuals delivered artworks to Haley & Steele for sale under documents titled “consignment agreements.”
- Under the typical private-consignment agreement, Haley & Steele received possession for a stated period, agreed to care for, insure, and handle the artwork, and had authority to sell at agreed prices for an agreed commission.
- The consignment agreements provided that title to the artworks remained with the consignors until the consignors were paid.
- Haley & Steele failed and abruptly closed; Century Bank & Trust Co. (the Bank), a secured creditor of Haley & Steele, seized a substantial quantity of artwork that was in Haley & Steele’s possession.
- Multiple parties asserted ownership or other rights in the seized artwork; with the parties’ cooperation, the court appointed Camille F. Sarrouf, Esq., as Special Master to conduct hearings and sort claims.
- The Special Master’s Fifth Report grouped claimants into five categories, including “consumer consignors”—individuals who had used the artworks for personal purposes before consigning them for sale through Haley & Steele.
- Objections to the Fifth Report required the court to decide the relationship between common-law ownership/consignment principles and two Massachusetts UCC provisions: G.L. c. 106, § 2-326 and G.L. c. 106, § 9-102(a)(20).

## Issues

1. Whether artworks delivered to Haley & Steele by “consumer consignors” were a UCC Article 9 “consignment” under G.L. c. 106, § 9-102(a)(20), such that the Bank’s security interest could reach the artworks unless the consignors filed under Article 9.
2. Whether G.L. c. 106, § 2-326 (sale on approval/sale or return and related creditor rules) made the consumer-consigned artworks subject to Haley & Steele’s creditors despite the limits of § 9-102(a)(20).
3. If the transactions were not governed by Article 9’s consignment rules, whether common-law consignment/bailment principles left title in the consumer consignors and kept the artworks beyond the Bank’s collateral.

## Decision

- The court agreed with the Special Master’s treatment of “consumer consignors” as owners with title, not as general unsecured creditors of Haley & Steele.
- The court concluded that the consumer consignors’ arrangements were not governed in a manner that allowed the Bank to treat the artworks as Haley & Steele’s inventory collateral under Article 9’s consignment scheme.
- The court rejected the argument that § 2-326 converted these consumer consignments into goods subject to the consignee-merchant’s creditors in this setting.
- Because the consumer consignors retained title under their agreements and applicable non-Article 9 rules, the Bank was not entitled to keep the consumer consignors’ artworks based solely on its security interest in Haley & Steele’s assets.

## Legal Principles

- Article 9’s consignment rules apply primarily to commercial consignments that function like inventory financing; consumer consignments of personal-use goods may fall outside that regime under the statutory definition and exclusions in G.L. c. 106, § 9-102(a)(20).
- When a transaction is outside Article 9’s consignment definition, Massachusetts common law governing consignment/bailment and retained title continues to control the ownership question as between the consignor and the consignee’s creditors.
- A secured creditor generally cannot obtain greater rights in specific goods than the debtor had; if the debtor held the goods for sale as a consignee/bailee while title remained with the owner, the creditor’s lien does not attach as if the goods were debtor-owned inventory.
- G.L. c. 106, § 2-326 does not, on these facts, override the limits built into § 9-102(a)(20) so as to strip consumer consignors of retained title and treat their property as available to the consignee’s secured lender.

## Conclusion

In the Matter of Haley & Steele, Inc. held that individuals who consigned personal-use artwork to the dealership under agreements reserving title remained owners of their works, and neither UCC § 9-102(a)(20) nor § 2-326 gave the dealership’s secured bank the right to seize and hold those consumer-consigned artworks as collateral for the dealership’s debts.


In the Matter of Haley & Steele, Inc., 20 Mass L. Rptr. 204, 2005 WL 3489869 (2005)