|
The Law and Martin Johnson Heade
Martin Johnson Heade (1819-1904) was a nineteenth century American
painter. His major works were landscapes, florals, still lifes and
tropical scenes. He was a member of the Hudson River School, yet with a
career spanning 65 years, it is difficult to put a single label on his
art. A number of his paintings are reproduced below. They are
typical of his work. 
His paintings (real and forged) are featured
prominently in a number of court cases. Three in particular are worthy
of note and illuminate different legal principles. The first case,
The Estate of Martha Nelson v. Carl Rice and Ann Rice, 198 Ariz. 563, 12
P.3rd , 238 (2000) involves every flea market, tag sale and estate sale
attendee's fantasy. In response to a newspaper ad, Carl Rice attended
an estate sale held by the Estate of Marta Nelson and paid $60, the
asking price for two paintings. The price had been set by the
co-personal representatives of the estate, Edward Franz and Kenneth
Newman, who had engaged an appraiser, Judith MacKenzie-Larson, to
appraise the estate's personal property. She told the personal
representatives that she did not appraise fine art and that, if she saw
any, they would need to hire an additional appraiser. She did not
report finding any fine art and, relying on her silence and the
appraisal report, the price was set. Carl Rice bought the painting
because he liked the subject matter of one, and the frame of the other.
At home Carl checked the signature on the paintings with a book of
artist's signatures and noticed that they were similar to those of
Martin Johnson Heade. The Rices sent photographs of the works to
Christie's in New York, which authenticated them as the work of Heade.
At a subsequent auction conducted by Christie's, the paintings sold for
$1,072,000. When the estate found out about the sale in February
1997, it sued the appraiser, believing she was responsible for the
entire loss. Unfortunately for the estate, the appraiser had no assets
with which to pay damages, and the case was quickly settled. In
January 1998, the estate sued the Rices, claiming a mutual mistake
(neither party had known what was involved) and unconscionability
(extreme unfairness). After both parties had exchanged summary judgment
motions, the trial court concluded that, although the parties had been
mistaken about the value of the paintings, the estate bore the risk of
that mistake. It also held that the contract was not unconscionable
since Carl Rice had paid the price the estate had set on the paintings.
An appeal ensued. The estate pressed its claims of mutual mistake and
unconscionability to the Appellate Court. The Court noted that a party
seeking to rescind a contract, on the basis of mutual mistake, must show
by clear and convincing evidence that the agreement should be set aside.
The trial court had concluded that the estate bore the risk, since it
acted on the basis of limited knowledge but treated its limited
knowledge sufficient. The Appellate Court held that by relying on the
opinion of someone who was admittedly unqualified to appraise fine art
to determine itsexistence, the personal representatives consciously
ignored the possibility that the estate's assets might include fine art,
thus assuming the risk. The Court concluded this section of its
decision by noting, under the circumstances, the estate was a victim of
its own folly, and it was reasonable for the trial court to allocate to
it the burden of its mistake. The estate also pressed its claim of
unconscionability, after all, it sold paintings in excess of $1,000,000
for $60. The Appellate Court said "no." There was no negotiation, the
estate dictated the terms of the contract by setting the price and Carl
Rice paid the asking price. The Appellate Court ruled in favor of the
Rices. What we learn from this case: 1. If you are involved
in handling an estate and there is the possibility that fine art might
be involved, make sure you use an appraiser who knows it when he sees
it. 2. If you are a collector and you see something at an estate
sale that looks like an incredible bargain (if authentic), pay the
asking price. Trying to save a few dollars could cost you $1,000,000.
The second case, Ketcham v. Franklyn Gesner Fine Paintings, Inc.,
181 Ga. App. 549, 353 S.E. 2nd 44 (1987) involves discovery of a
different sort. In early September 1980, Ray Ketcham, a Georgia art
dealer, received a call from one Jerry Melton, who lived in Atlanta.
Melton offered Ketcham a painting supposedly by Martin Johnson Heade,
which he had received from his brother's widow in payment of a $5,000
debt owed to him by his late brother. According to what he told
Ketcham, Melton ran into trouble with the IRS and sought to sell the
painting for $35,000. He brought the painting to Ketcham who examined
it under both a strong white light and a "black light", looking for
discrepancies. He also checked it against known Heades and concluded,
based on his efforts, that the painting was genuine. Ketcham agreed to
pay Melton $25,000 upon the sale of the painting, for which he was given
a week. Anything above $25,000 would be Ketcham's. Melton required that
the receipt for the painting be made out to his son, Michael, because of
his IRS troubles. On September 11, 1980, Ketcham called Franklyn
Gesner, a dealer in nineteenth century American paintings in Largo,
Florida, and told him about the Heade painting. Ketcham told Gesner
that the painting had come from an estate in North Carolina (home of the
dead brother). Ketcham did not tell Melton's story (the brother's debt,
the IRS issues). Gesner flew to Atlanta, examined the painting in
the same manner as Ketcham had and satisfied himself that it was by
Heade. He offered $32,500. Gesner had purchased a similar Heade a few
months earlier from a young woman in Florida, which he sold a half
interest in. The owner of the half interest noted that the work was not
one of Heade's best efforts, yet a major art auction house offered
transparencies to the leading American expert on Heade paintings prior
to including it in its auction catalog. That expert, based on his
examination of the transparencies, authenticated the painting. On
the day before the auction of the Florida Heade, as fate would have it,
the expert was conducting a tour of art students through the auction
gallery. When he saw the Florida Heade in person, he was struck by the
"brightness" of the picture. Apparently, the contrasts between the
light and dark sides of the painting were unusual for Heade. The expert
made an effort to examine the painting more carefully, became concerned
and told the auction house to withdraw the painting from sale. Gesner
admitted the expert and told him about the Georgia Heade. The expert
agreed to examine both. The expert determined that one long board had
been cut in half and used for each painting. Also, a type of paint was
used that postdated Heade's death. Both paintings were the work of the
same forger. Gesner contacted Ketcham and asked for his money back
($32,500), or the consignment fee and a claim against Ketcham's original
seller. Ketcham refused. Gesner sued Ketcham claiming breach of
contract, fraud, and rescission (to reverse sale). The case went to the
jury on the fraud and breach of contract counts. The jury awarded
Gesner $32,500, plus $6,263 in punitive damages and $31,337 in legal
fees, for a total of $70,100 based on fraud. Ketcham appealed. The
Appellate Court noted, for the jury verdict to stand, the following had
to be present: 1. Ketcham represented to Gesner that the painting
was by Heade. 2. At the time of the representation, Ketcham knew
the work was not by Heade (i.e. a lie), or had substantial reasons to
doubt the authenticity of the painting. 3. The false
representation was made by Ketcham to deceive Gesner. 4. Gesner
relied on the representations. 5. Gesner suffered loss as
proximate (legal) result of the false representations. The Appellate
Court examined the record. While it concluded that the evidence showed
Ketcham represented the painting to be by Heade and that Gesner suffered
a loss as a result, it found the other elements were not present.
First, the Court was satisfied that Ketcham believed the painting to be
by Heade based on his own examination. Gesner performed his own similar
examination, and believed the painting to be a Heade. The expert, based
on his examination of the transparency, believed it (even when the
painting was confirmed to be a forgery, the expert said it was a "good
one"). It is important to note that the Court reached this conclusion,
even though Ketcham was less than candid of the painting's provenance.
Ultimately, the Court concluded that, since Gesner had satisfied
himself of the painting's authenticity through his own exam, he did not
rely on Ketcham's false but innocent representations. What we learn
from this case: 1. Beware of what is too good to be true.
2. Satisfy yourself as to the provenance of a painting.
3. Don't simply rely on expert opinions (especially if based on a
transparency or photo examination only). 4. Experts are not
infallible. The third case, Spanierman Gallery Profit Sharing Plan
v. Arnold (US District Court SDNY No. 95 Civ. 446a, 1997 WL 139522
(SDNY)), involves a dispute among two art dealers. Arnold contacted
Spanierman in May 1992 and told him he represented a private collector
seeking to sell a painting by Martin Johnson Heade entitled "Two
Hummingbirds and Orchid". Arnold said he was to receive a 10%
commission. Spanierman paid $330,000 for the painting.
Subsequently, Spanierman sued Arnold claiming that he had misrepresented
his interest in the property (he actually owned an interest in it) and
that, as a result of the misrepresentation, Spanierman suffered a loss.
This claim was asserted despite the fact that Spanierman resold the
painting at a profit in excess of $100,000. The legal theory put
forward was unjust enrichment based on misrepresentation. Spanierman
claimed that had he known Arnold owned the painting, he would have paid
less, because everyone knows that the value of a painting in the hands
of a dealer is less than it would be in the hands of a private
individual. Had he paid less, Spanierman would have made a greater
profit, hence the basis for his claimed loss. The Court made short
shrift of the plaintiff's arguments. A $100,000 profit made an unjust
enrichment claim questionable at best. The contract between the parties
which governed the sale made the doctrine inapplicable. The
plaintiff also urged the Court to find that the defendant had violated
the implied covenant (promise) of good faith and fair dealing inherent
in every contract. The Court saw no basis in the trade for the claim
that the failure among dealers to inform a buyer that the dealer owned
the work in question breaches reasonable commercial standards.
Spanierman lost, and had to be content with his profit. What do we
learn from this case: 1. Pick your battles. A profit in excess
of $100,000 is not going to garner any judicial sympathy. A judge or a
jury will bring common sense to the table 2. In the legal world,
the identity of the seller of an authentic work of art, will likely be
irrelevant (assuming the seller owns and has the right to sell the
painting). When Martin Johnson Heade began his long and illustrious
career, he probably gave little thought to law. Nevertheless, much as
his paintings have delighted eyes, they have also illuminated the law.
|
