Guggenheim Foundation vs Lubella - Research Paper Example

Guggenheim Foundation v. Lubell: An Equitable Solution to Resolve Competing Rights Between the Original Owner and Good faith Purchaser for Value This paper seeks to discuss the doctrine laid down in the seminal case of Guggenheim Foundation v. Lubell1 and examine the concepts of “demand and refusal rule”, statute of limitations, laches and adverse possession. This paper argues that the “demand and refusal” rule is a valid principle in art law, in that it is a check against fencing of important and valuable art work, and an extraordinary measure to ensure that the great works of art do not fall into the black market. This paper argues further that the doctrine of laches is a proper check against the possible abuse of the statute of limitations. Background of the case This case involves a rare gouache painting known alternately as “Menageries2” by the famous artist Marc Chagall, which was stolen in the 1960s from the Guggenheim Museum by a thief who had never been apprehended. In 1967, the Lubell family bought the art work from a local art gallery without knowing that it had been stolen.3 The Guggenheim Museum did not undertake to search the painting when it was stolen, or to contact the police nor did it make public the loss of the painting from its premises4. There was also no effort to contact local art galleries to inform that the painting had been stolen.5 In 1985, it was discovered that the painting was with the Lubells and the museum in 1986 wrote to Mrs. Lubell, demanding the return of the property. As Mrs. Lubell refused to turn over the painting, the museum filed an action for replevin, or an instant action for the recovery of the painting, or in the alternative, the amount of $200,0006. Mrs. Lubell raised as defense the fact that she was a purchaser in good faith for value, that the statute of limitations had run out, that laches had set in and the misconduct of the museum. The museum stated that its failure to report the theft to competent authorities or to undertake a search of the missing Chagall painting was a calculated move on its part, as it did not want to drive the painting further underground. In the trial court, it was held that the three year statute of limitations had barred the cause of action of the plaintiff museum. The court held that while the State of New York reckons the point when the cause of action accrues to the time when demand was made7, for purposes of determining when the statute of limitations begins to run, the twenty years that it took for the museum to demand the painting was unreasonably long and was therefore time-barred. The appellate court modified the decision of the trial court and stated that the trial court erred when it held that “delay alone can make a replevin action untimely.8” It also looked into the conduct of the museum and gave credence to the argument of Mrs. Lubell that the failure of the museum to take the necessary steps and to exercise due diligence in searching for the art work said to have been stolen after the discovery that it was stolen gave rise to a case for laches. In essence, the doctrine of latches states that a plaintiff who has been shown through evidence to have neglected exercising his rights for an unreasonable period of time, and then suddenly asserts it at a later day, shall not be entitled to the avails of a suit. It is also a requirement of the doctrine of laches that the party invoking it prove that he or she was prejudiced by the plantiff’s inaction. Only, in this case, the court did not seem to require it from Mrs. Lubell when it made a determination that indeed the museum was guilty of laches. Main issues The issues gravitate and converge around three major faultlines, or values if you will: the degree of diligence required of an original owner whose property had been stolen, the necessity of protecting good faith purchasers for value, the common objective of taking care of art work and the products of human artistic genius. For the most part, the State of New York has been generous to the owners of stolen property, and there have been criticisms levelled against the Guggenheim Foundation case9, for the lack of protections that it affords to innocent purchasers for value. The bias in favour of original owners is manifest in the case of Erisoty v. Rizik10 where there was a thirty year lapse between the time that the painting had been discovered to be lost and the time that demand had been made. But the court held that the owner’s act of calling the police was enough to fulfil the standard of diligence required. Also, the court held the purchaser to task for not conducting a due diligence investigation: it demonstrates, according to the court, a willingness on the part of the purchaser to risk having the original owner surface and reclaim the art work. The “demand and refusal” rule is reckons the three year statute of limitations from the time that demand was made on the purchaser and the purchaser refused. In the case of DeWeerth v. Baldinger,11 World War II was the backdrop and the context of the disappearance of a Monet landscape from the house of Gerda DeWeerth in 1945. After more than three decades, or in 1981, Mrs. DeWeerth had discovered that the painting had been exhibited in 1970 in a New York gallery. The defendant gallery asserted in its defense that the statute of limitations in New York was only three years and Mrs. DeWeerth had failed to filed suit within that time period, thus the statute of limitations had run against the plaintiff. In finding for the plaintiff Mrs. DeWeerth, the court held that the running of the statute of limitations only begins when demand had been made but was refused. After demand was made, the purchaser cannot be deemed to be a good faith purchaser anymore. Another approach is the “discovery rule”, which was crystallized in the case of O’Keeffe v. Snyder,12 decided by the New Jersey Supreme Court. In that particular case, paintings by the artist O’Keeffe were lost from a New York gallery in 1946. There was no report to the police made. It was in 1975 when the artist learned that the paintings were on consignment and were being claimed by the owner of Princeton Gallery of Fine Art. She then filed a replevin suit shortly after. The New Jersey court applied the “discovery rule” which “provides that a cause of action does not accrue until the injured party discovers, or by the exercise of due diligence should have discovered, the facts constituting the basis of the action.”13. Thus the burden is on the original owner to prove that he or she had exercised necessary diligence in retrieving the property, and not on the subsequent owner to prove that he or she is not in bad faith and had exerted all efforts to find out where the art work came from. An important implication of this rule is that period is reckoned from the knowledge of the fact of dispossession, rather than knowledge of the identity of the wrongdoer or subsequent possessor. On the other hand, the “Demand and refusal” rule, by necessary implication, requires that the original owner knows the identity of the subsequent purchaser, because a valid demand can only be made if the right person is demanded from. Analysis Debates still continue the hound these competing approaches. However, it is my argument that the demand and refusal approach, combined by the rule on laches, most appropriately balances the competing interests between the need to protect innocent purchasers for value while at the same time not aid and abet the black market for art works and thus prejudice artists and legitimate art aficionados. It is true that the art black market is a profitable criminal enterprise and the problems are tremendous. To quote Jacob14: Many dealers buy artwork after little or no inquiry into its ownership, allowing them to contend later that they had no idea a work was stolen. Purchasers of works of art often rely on dealers’ representation and warranties without conducting any further investigation of their own, and later claim that they bought a stolen artwork in "good faith." To reckon the period of running of the statute of limitations from the time that demand has been made is the most fair for both parties. For the party who is the original owner, he or she has sufficient amount of time to bring a suit for replevin, whilst at the same time, the clock will not start ticking until he or she has made a demand against the subsequent purchaser. For the purchaser, there is at least still a time frame, and a deadline after which there can no longer be any suit. This may be interpreted as overly favouring the original owner and prejudicing an innocent purchaser who may just be an art lover – after all, the original owner may just drag his heels and wait it out before making a demand, or his or her descendants can bring vexatious suits against subsequent purchasers, claiming their rights as heirs. It is likewise true that the very purpose of a statute of limitations is to get the plaintiff to assert their rights at the soonest possible time so litigation, or the vulnerability to litigation do not go on forever. However, this is where the doctrine of laches come into play. If the assertion of rights had taken so long, and if there was a showing that the conduct of the plaintiff is such that it can be assumed that he did not take the necessary efforts to look for and retrieve the stolen items, then he or she is barred from bringing suit. Those who think that the Guggenheim case is too tilted in favour of the original owner should consider the fact that when the court decided to rule in favour of Mrs. Lubell, it did not even require her to demonstrate that she was prejudiced by Guggenheim Museum’s failure to timely assert its rights over the piece of artwork. Hence it was a perfectly calibrated balance, taking into account the rights and interests of the parties, as well as the overarching need to protect the stability of the art market and the rights and interests of artists in general against this “organized crime”.15. In comparison to New Jersey state law on property, the New York law is more fair and even-handed. In New Jersey, the clock starts to tick when the discovery of the loss has been made. What happens if the loss was indeed discovered but there was a dearth of information on who the thief might be, and what the chain of events are, leading to the subsequent sale of the art work to a gallery or private home? It is prejudicial to the original owner of the art work because he cannot immediately bring demand (not knowing who to demand from), and yet the period in which he can bring suit has started running. WORD COUNT: 2036. Bibliography Cases Burd v. New Jersey Telephone Company, 76 N.J. 284. 386 A.2d 1310 (1978). DeWeerth v. Baldinger 38 F.3d 1266 (2d Cir.) cert. denied 513 U.S. 1001 (1994) Erisoty v. Rizik, No. 93-6215, 1995 U.S. dist. Lexis 2096 (E.D. Pa. Feb. 23, 1995), aff’d No. 95-1807 (3rd Cir. 1996). Guggenheim v. Lubell. 77 N.Y.2d 311, 569 N.E.2d 426, 567 N.Y.S.2d 623 (1991). O’Keeffe v. Snyder, 170 NJ Super 75, 84, A 2d 840 (1979). Journals and Publications Jacob, Jane. (2002). “Stolen Art: How to Keep It Out of Your Collection”. Chubb Collectors. Accessed October 12, 2011. Available at http://www.chubbcollectors.com/Vacnews/index.jsp?form=2&ArticleId=85 Patty Gerstenblith (1992). “Guggenheim v Lubell”. International Journal of Cultural Property, 1, pp 359-368 doi:10.1017/S0940739192000390. Margules, P. (1992) "International Art Theft and the Illegal Import and Export of Cultural Property." Suffolk Translational Law Journal. Read More