Freshwater Instruments close down

[Daithio]

VISA has guarantees in the US. I'll talk to my bank about it, but it has been since Feb. 2009 and it was an international transaction so I don't know if it would work. I'd love to be able to put the money toward another instrument.

[Tavy]

VISA has guarantees in the US. I'll talk to my bank about it, but it has been since Feb. 2009 and it was an international transaction so I don't know if it would work. I'd love to be able to put the money toward another instrument.

Wow, that's one long period of time. Had it been me I think I would have been going to the County Court long before that, but ... sigh... international transaction again

Anyhow I really hope you can get something back.

Regards, John.

[Noahs Warning]

I'm affected by the Freshwater closure too, although since I paid on my credit card I hope that I get my money back. There is another dimension to this though, I can understand the desperation of trying to keep a business that has been your way of life for many years, but the deception is difficult to take. I really thought he had become a distant friend; I chatted to him about my experience of scotland and my job, years ago, in the Raigmore hospital in Inverness. Now reading all of the postings in this thread, I realise just how formulaic were his assurances and responses; I've heard most of these too. I guess I shall come out of this with my money, I'm sorry that others will lose out financially, but the feeling of being used and deceived, quite deliberately takes some understanding.

[MikeEdgerton]

I don't know the man, I've never seen any of his instruments but this is not a new problem and will unfortunately reel it's ugly head every few years just as it has in the past. We've seen similar cases three or four times in the last four or five years. Some have attempted to come out of it. Some are still operating, owing folks money and instruments, and some disappear forever.

[jim_n_virginia]

I own a Freshwater octave mandolin that I was thinking about putting up for sale in the classifieds ... now that I know no more will be built maybe mine is worth more now! LOL!

But seriously ... even if you are protected by bankruptcy laws and legally you get out of having to deliver to customers who have already been paid you would think one's conscience come into play.

If it were me I'd make the instruments in my garage to at least give to those who paid in full and and were already promised instruments. I feel for the small businessmen who go under but there is a such thing as honor.

[Stephen Perry]

Most business people learn the law by blundering into it. Relatively few do the research to figure out what's what. Even fewer follow up on what's what. The bankrupt firm owing $$ to many runs business people and their clients into the law very hard.

Here in the US, one can perfect a security interest in one's goods held at someone else's business. I know how to do this, but am not in the business of advising others. If you're having something built that's expensive, having something worked on that's expensive, or otherwise giving someone else something expensive of yours, it will be useful for you to ensure that, should anything happen, you can relatively easily retrieve what is yours.

For example, in the US, should one contract (and there should be a written contract) for a custom instrument, one could set up that contract so that the first payment actually purchases the materials for your instrument (identifies them specifically as much as feasible), gives you a security interest in those materials, and is followed by your filing of a UCC-1 with the state. Then the materials are yours. You're at the top of the heap with respect to those materials should the firm fall into bankruptcy.

Even big firms sometimes fail to do this. In the musical instrument business this type of thing happens, where unsecured trade creditors fail to perfect a security interest and have stuff not yet paid for sold. With no recourse. See, e.g., http://www.vaticinate.com/musings/au...brooksmays.htm where some familiar names show up. Note that this site gets a malware warning for me, but I didn't detect or find any. Look at the unsecured creditors on the right. When you give someone cash for something to be delivered in the future without any effort to be secured, you end up on the right.

People good at instruments can easily find themselves out of their depth in the business end of things, and unable to determine whose advice or direction to follow when difficulties occur. I know several small luthiers who have barely avoided bankruptcy and have been unable to easily figure out how to protect assets sufficient to repay trade creditors. They've all come through, but had to engage in some creative solutions and work like mad.

Note that my comments above refer to the US. Please research credit card protections in the US prior to relying on them.

[michaelpthompson]

If it were me I'd make the instruments in my garage to at least give to those who paid in full and and were already promised instruments. I feel for the small businessmen who go under but there is a such thing as honor.

As Stephen pointed out, there are weird things that come into play with bankruptcy laws. I have no idea if it applies in this instance, but it is possible that any instruments crafted by the business owner would become assets, and assets must be distributed according to bankruptcy laws. So it may not even be possible for him to do something like that. It's a tremendously complex morass and impossible to make any specific comments without more facts.

Sounds unconscionable that the man would continue to promise instruments to people, and even say they are finished and ready to be shipped when he must have known this was on the horizon. But again, we have no real facts to deal with here. It's obvious from the content of the message received by the OP that Dave Freshwater was not allowed to share any information previously, so that accounts for some of it. And although the hope has been expressed here that the business might reopen or he might be able to make good on some of the instruments, the message said the bankruptcy was liquidation not reorganization, which means the bank has probably seized all of his assets and will sell them to recover whatever they can. He must have been pretty heavily in debt with little prospect of paying it off for them to take such action. He mentions no prospect of an instrument at the outcome and offers only the hope of recovering funds from a credit card payment, so I guess there's no real hope of delivery. He'll probably still owe the bank money after the liquidation, so any instruments he makes after that may be required in payment as well.

This is all speculation based on a few words in an e-mail, but mostly to say I wouldn't judge the man too harshly nor exonerate him either, based on the sparse knowledge we have. Too many unknowns.

[John F]

My inquiries so far suggest that Freshwater customers from Canada and probably the US will not be able to recover their credit card payments. I will be interested if anyone has any other information.

[P.D. Kirby]

Whats unfortunate with things of this nature is, in a already flat market, the folks that have finally gotten to the financial position to commission a build must now question, where 6 month to 1 year lead times are the norm if they are just lining some bankers pocket. I had considered buying from a small builder recently and even spoke to a few. Then not too long ago I was doing some searching to see what all the fuss about Rono Mandolins was and got a rude awaking of the perils of Small Shops. Now I read this thread and I am convinced that I will purchase (new or used) from a dealer that has the Mandolin in stock. I for one can't afford to just throw the money away as was suggested in a previous post.

Mr. Perry is offering some very sound legal advice. Thanks Stephen.

[Ivan Kelsall]

We will probably never know the 'real story' behind the demise of Dave Freshwater's business,i wish we could,it could offer a few pointers in the direction of 'pitfalls to watch out for' when building instruments.
In the UK,filing for bankrupcy has become more widespread amongst people running into financial problems, as a way to escape the burden of debt.
Until the recent banking crisis,money had never been easier to borrow,with credit companies offering loans with months of 'free credit' & loans of all sorts which resulted in people borrowing more than they can now afford to pay back,due to the change in financial circumstances. It's not rocket science to understand that if you borrow more than you can pay back,when the bank or 'whoever' calls in the loan - you're dust !,but i'd like a £1 UK for every over-stretched business out there right now,i bet that there are 1000's of them just hanging on. The situation has been made infinitely worse by the world wide banking crisis,with businesses hoping to survive by obtaining (further) bank loans which at least in the UK, are simply un-available right now - unless you're a bank that is,
Ivan

[Bertram Henze]

i'd like a £1 UK for every over-stretched business out there right now,i bet that there are 1000's of them just hanging on. The situation has been made infinitely worse by the world wide banking crisis,with businesses hoping to survive by obtaining (further) bank loans which at least in the UK, are simply un-available right now - unless you're a bank that is

In times like these when everybody seems to be in debt - even whole countries - I come to think that money is just a figment of our imagination (or computers' imagination), and one morning we will wake up to reality and find that all we got is our mandolins.

[Stephen Perry]

The imaginary nature of money is likely much worse than you realize. Especially the way money is manufactured by the banking system. Fortunately the level of reserves required is gradually increasing. Money with real intrinsic value has generally been flushed out by governments that do not wish to actually encumber themselves with physical reserves. It does make sense in a general way, but has both an inherent unreality and a temptation to just print more of the stuff.

Money these days primarily consists of numbers stored in computers. An odd world.

I've started accepting (preferring) silver and gold in payment. Gold seems quite stable at an interesting price. Silver at about 40 times less. For those interested, a wide range of numerical games suggest a ratio of 15:1 is more typical, perhaps indicating an eventual drop in gold or rise in silver is possible. Regardless, the coin is worth something and serves as a hedge. I wouldn't go out and buy such things as an investment. It's like ammunition and tobacco - if bad things happen, one can buy things with it.

But we're stuck in that digital money world.

A. One has to investigate a little. If a business has no resources now, one might consider not letting that business have your money or other goodies. Little recourse if there are no assets.

B. If a business has assets and one decides to do business with them, put things in writing.

C. Don't let the business just have your money. Make sure they have your stuff, that's clearly yours. If you send in an instrument, photograph it, describe it (serial number etc.), get a receipt from the business specifying that the item is yours. Be aware than a bankruptcy trustee or other fiduciary will likely consider everything in the business as inventory. If you're buying something that will take some time to get to you or be made, make sure a physical thing is identified specifically. As I mention above, picking out the wood and getting paper showing that you now own the wood may well prove useful. Think of this as if it were a consignment of something already yours. Imagine your thing simply hanging in the shop with everything else that's for sale, and someone buys the whole shop. They believe your thing is theirs. The law will back them up under many circumstances. You need to be able to prove to the new owner (the bankruptcy trustee or judge, for example), that the thing is yours.

D. For expensive things, the UCC filings and other paperwork will prove quite useful. Think "title" and this will make sense. Some points here on consignments: http://www.allbusiness.com/accounting/3486374-1.html Also investigate "bailee liability."

E. Off the top of my head, I believe CC companies will generally allow 120 days to reverse a charge. Past that, one seems to be treading in deep water. And with offshore entities one may well be in very deep water. I'm not at all sure how to protect oneself. In this specific matter, if several US citizens are owed money, they might be able to split the cost of further investigation, perhaps securing some stake in whatever division of assets occurs. I would first investigate the system, the rules, and the specific assets. If there's no hope, then I'd give up. But I'd really make sure there was no hope.


I am amazed at how some people will take money and keep it. I've suffered from similar things, and been barely able to come out ahead, even with apparently proper paperwork. I've also over reacted and probably kept things I shouldn't have. I don't feel good about this, but I wasn't nearly as experienced then and possibly overreacted to hostility and threats. I've found that over communication is generally superior to under communication in matters involving goods and money. This does place a burden on a very small business. Nevertheless, in any circumstance a business owes, in my assessment, a duty of honesty to it's clients. I suspect many of the apparent dishonest things spring from self-delusion, wishful thinking, or a gradual slippage into bad habits, rather than the transition of someone into a "bad person." Or simply forgetting or getting confused when things in the business get overwhelming or outside events interfere. Certainly when Gianna was injured I was greatly stretched in getting everything done that needed doing and missed a number of deadlines.

When something starts to come to light I recommend developing a plan after doing some research and investigation. Usually a sequenced progression of inquiry and pressure works to get one at the top of the heap, or allows one to retrieve one's assets before the collapse. In other circumstances, a grand slam may be more effective. The first process server seems to have the most impact. Having served defendants personally, I can tell you that it does gain some attention!!

Certainly, threatening legal action informally is not a good path. It warns the opponent, if one is serious, and more importantly, is rarely followed through. I have been informally threatened with legal action. Without considering the merits of the matters, my general response is to immediately sequester the funds at stake or put the items at issue into storage with labels. To start a file. And to await arrival of the plaintiff's attorney's first certified demand letter. At that point, I stop and wait. I will wait for six years if required to let the UCC statute of limitations run out. So I do not recommend any form of threat, even something like "I will have my attorney write the so and so" on a forum. That type of thing might ground the matter very hard, and require some cash outlay to break free. One of those lines that once crossed proves difficult to uncross. Actually, my tendency to stand my ground very hard and very quietly has resulted in at least two quick and equitable settlements of matters not of my making that I got sucked into. Leaving the resulting actions (if any) solely between others, and me out of it.

In general, I strongly suggest that those doing business with expensive things involved learn the basics of contract law, the Uniform Commercial Code, and the general outlines of bailee liability, consignee liability, and carrier liability. Joining and using constantly a service such as Prepaid Legal can prove very useful. Not falling into a hole is so much easier than climbing out of a hole!

In the music business, the business owners I know would recover from bankruptcy and start filling the orders or refunding money as circumstances allow. That can be a difficult thing, but everyone ultimately ends up OK with the matter. In contrast, corporations and other non-person entities tend to simply snuff themselves out, with nobody personally taking responsibility.

This type of thing does happen. The Brooks Mays example shows the corporate dissolution approach - where bankruptcy liquidation led to substantial loss to creditors - while the Mid-Mo example shows an appropriate personal business approach. I personally know of two violin shops with different approaches. One owes a supplier over $20K and simply stopped paying, but remains in business. I'd have gone after the shop, but this supplier just wrote it off. The other owed the same supplier $20K, and worked night and day to pay that off prior to closing up shop and moving to another state. Both were sole proprietors. Anyone commissioning an instrument might do well to consider which one of those models the owner is following.

Myself, I won't take commissions. There's too much variability in my business for me to reliably produce things. I'm working towards changing the business model, but the time being, that's the situation.

Good luck all.

[Daithio]

Finance confuses me (I'm a historian by trade and not much of a theoretician), but I certainly will not try to order an instrument online again. The internet is great for books, downloading music, even buying computers (Apple seems pretty solvent these days), but I'll only buy an instrument face-to-face. However, I am also taking a different view than before of Asian factory-built instruments: the Johnson I've been playing for five years is an infinitely better instrument than the Freshwater that never came.

[cedartower]

I bought a Freshwater cittern a few years ago. Dave said it would take two months. It took a year and when I went to pick it up he offered me a wide necked mandola which he said I ordered because of my big hands. My hands are so small that when I buy gardening gloves I have to buy ladies. He refused to accept that I had ordered a cittern. As a favour he said he could let me have a cittern in three months; it took six. It was unplayable at the nut end and fretted out at the twelfth fret. I was so pissed off by this time took it and tried to sort it our myself. I'm still waiting for the case for it that I paid £75 for.
The thing that I find odd about the current situation is why people have been contacted by Freshwater Instruments and not the Liquidator? Dave Freshwater crook or incompetent businessman? Your guess is as good as mine.

[Crieftan]

In Scotland a partnership, sole trader or individual is Sequestrated (bankrupt). Only limited companies are Liquidated.
Has anyone actually checked that he has been made bankrupt?
The Accountant in Bankruptcy based in Kilwinning maintain records of those made bankrupt and details of their trustee.
I would suggest anyone with a claim notifies the trustee as soon as possible.

[Bertram Henze]

I bought a Freshwater cittern a few years ago. Dave said it would take two months. It took a year and when I went to pick it up he offered me a wide necked mandola which he said I ordered because of my big hands. My hands are so small that when I buy gardening gloves I have to buy ladies. He refused to accept that I had ordered a cittern. As a favour he said he could let me have a cittern in three months; it took six. It was unplayable at the nut end and fretted out at the twelfth fret. I was so pissed off by this time took it and tried to sort it our myself. I'm still waiting for the case for it that I paid £75 for.

That story describes someone who seems to have problems with reality in general. Confusing orders is a symptom raising the question "what else escapes this man's attention on a daily basis?" It appears that now we know.

Since confusing orders normally happens to larger but poorly managed organizations, it also raises the question "who is he and if yes how many?"

[resophil]

A lot of things, some of them emotional, come into play in the business of purchasing a custom instrument...

Customers are sometimes swept away with the idea of buying the instrument of their dreams. Some have not only dreamed, they've worked, saved, considered, researched, e-mailed back-and-forth, and generally invested time, effort and money in the business transaction. But then a lot of people forget that it IS INDEED business...

How many people actually enter into purchasing an instrument WITHOUT preparing a contract? How many people might actually seek out legal advice in preparing such a contract? How many would research, as Stephen suggests, the legal ramifications if something goes wrong? Usually, a customer's efforts are so focused on the joy, anticipation and excitement of the new purchase, that the "business" stuff is swept aside. Emotions trump business sense in a lot of these cases.

Then we come to the actual mechanics of the transaction... How many people would pay a plumber or renovator in full to do a new bathroom for their home, and then expect to wait years for the completion of that bathroom? Yet, that model seems to be the norm in the world of custom instruments... What makes instrument builders different from renovators? It's emotion coming into play yet again!

Potential customers of instrument builders congregate on sites like this one, we natter back and forth about the instruments we crave, we read threads entitled, "My New Fr******* tel Mandolin. Fantastic!!!" and we all pile on with congratulations to the new owner. Once again, it's emotions at play!

The not-so-long-ago thread that ran for several months, about a talented builder who left a lot of people hanging, and is now hopefully finding his feet again, might have served as a warning to some, but I'll bet that they're lining up again to offer their money as down payments. Then, if a potential customer proposes a deal which actually protects both sides of a business transaction, the builder will refuse it because he has all these people waiting to throw money at him, hoping to be one of the few who can get a mandolin, and get it quickly. Our host allowed that thread to run for as long as it did because he stated that he had had more complaints about that one builder than any other in his history hosting this site.

I was a contractor for many years. I strived to give my customers great service and prices. Not every potential customer hired me, just as I told some people that I was "too busy" to do their work after talking to them and doing my due diligence about them... (Yes, I "fired" the customer!) When I hire someone (and I've ordered custom instruments myself...) I do my due diligence before I think about the emotional side of purchasing. But then I may be different; I tend to think of my instruments as tools.

[Darryl Wolfe]

In times like these when everybody seems to be in debt - even whole countries - I come to think that money is just a figment of our imagination (or computers' imagination), and one morning we will wake up to reality and find that all we got is our mandolins.

+10

[Crieftan]

Further to my post above this is the website of the Accountant in Bankruptcy http://www.aib.gov.uk/

They will be able to explain the process to anyone who is worried - but first of all they will be able to confirm if he actually has been sequestrated.

[fscotte]

This is the first I've heard--he didn't send me an email. Perhaps it's coming. I'm more than a little angry about this. He strung me along for 2 1/2 years. That was about 800 bucks lost. There wasn't anything I could do from across the ocean. He probably won't answer, but his name on here is Stringer.

I think the nickname should have been a warning sign. As in, I'm gonna string you along all the way...

[Daithio]

fscotte, Yes indeed!

[cedartower]

I'm sorry to hear this.

Freshwater operated from a town only about half an hour from me, but curiously I have never met him.

There was something about last winter having been very bad in Scotland given as a reason for a delay on one of these threads. I have to say I wasn't convinced by that at the time, and I wondered if all was well.

It is embarrassing to have a Scotsman letting people down in this way, though as Bertram points out he probably feels the worst about it. That's obviously no consolation to those who have been affected though.

I hope most of you will continue to find 'the Scotland symatico'.

Dagger, Dave Freshwater wasn't Scottish.

[John F]

Dagger, Dave Freshwater wasn't Scottish.

That much was clear in a telephone conversation.

[brunello97]

It is embarrassing to have a Scotsman letting people down in this way, though as Bertram points out he probably feels the worst about it. That's obviously no consolation to those who have been affected though.

I hope most of you will continue to find 'the Scotland symatico'.

No worries, Dagger, our enthusiasm for "all things Scottish" is hardly curbed. But, as a Texan who shares Natalie Maines's pain, I know where you are coming from. But in our case the torture never stops.

http://www.youtube.com/watch?v=KrQxQPG8JdE

Mick

[CES]

Stephen, I agree with your post completely, but it saddens me very much to do so. I truly wish an agreement and a handshake were still enough...further pontification deleted...