ART BUYERS BEWARE: TIMELY DILIGENCE IS MORE IMPORTANT THAN EVER
BY ART LAW EXPERT, JUDITH BRESLER
Buyers are increasingly aware that warranties of authenticity, when it comes to art, have a limited life-span: under the Uniform Commercial Code (UCC) a claim for breach of warranty must be initiated within four years after the art in question is delivered to the buyer. While it is true that under certain, limited circumstances, major auction houses, including Sotheby’s and Christie’s, extend the time period for a buyer to bring suit to five years, given the length of time that many collectors hold onto art, this is still a relatively brief time frame.
In September 2009, the case of Doss Inc. et al v. Christie’s Inc. held that the UCC’s four-year period applied not only to warranties of authenticity – but to warranties of title.
Here, a South Korean art collector, plaintiff Yoon Young Im (“Im”) purchased at auction at Christie’s, New York, in 1991 an oil painting by French artist Marie Laurencin entitled Portrait for $235,000, including the buyer’s premium. Im possessed Portrait continuously until sometime in 2006 at which time Im consigned the painting for sale with Sotheby’s in London.
During the course of its due diligence prior to selling the painting, Sotheby’s discovered evidence that Portrait was stolen by the Nazis from the famed Parisian art collector Paul Rosenberg, while the Nazis occupied Paris during World War II. Portrait was one of innumerable paintings looted from the Rosenberg collection, which included works of Picasso, Degas and Henri Matisse, among others of modern masters, and since the 1950’s, Rosenberg’s descendants have worked diligently to recover much of the stolen art.
Presumably, Sotheby’s disclosure to Im was the first time evidence was discovered tending to show that Portrait had been stolen. In January 2008, Im informed Christie’s of the pending Rosenberg claim to Portrait and requested that Christie’s investigate the matter and make compensation to Im.
Im then brought an action against Christie’s in a New York federal district court, seeking to rescind the contract for the sale of Portrait and to recover its purchase price. At the time of the suit, Portrait remained in Sotheby’s possession, pending resolution of this suit and any other related actions that may commence. (At the time of this writing, the Rosenberg family has made an informal demand for the return of Portrait and Im expects to be sued for its return.)
Im sued on claims of breach of warranty of title and negligent misrepresentation. Christie’s moved to dismiss the suit, alleging that Im’s claims were not made timely, that is, that the statute of limitations for bringing suit had expired.
The New York federal district court agreed and dismissed Im’s lawsuit against Christie’s.
In dismissing the lawsuit, the court reasoned as follows:
Breach of Warranty of Title
Under § 2-275 of the UCC, a claim for breach of warranty must be initiated within four years after delivery of the goods to the plaintiff – regardless of the plaintiff’s lack of knowledge of the breach – unless the warranty explicitly extends to future performance of the goods and discovery of the breach must await such future performance.
As the court noted, delivery of Portrait to Im occurred in 1991, when he bought it, and Im does not contend that a warranty explicitly extending to future performance is applicable here. The warranty allegedly breached here is a warranty of title, and as the court noted, the only warranty of title on which Im can sue is provided by § 2-312 of the UCC. This warranty provides, in pertinent part that title conveyed in the property is good and that the property shall be delivered free from any security interest or other encumbrance of which the buyer, at the time of purchase, had no knowledge. There is no provision in this warranty extending to future performance of sold property.
Although Im argued that claims for breach of warranty of title arise when “the owner’s position is interfered with, not when the goods are sold,” the court rejected that argument and stated that the UCC appears to make no distinction between accrual of a cause of action for breach of warranty of authenticity or breach of warranty of title: both are of a limited duration.
Negligent Misrepresentation
The court also found Im’s claim for negligent misrepresentation to be untimely. As the court noted, assuming this claim is treated as separate from Im’s breach of warranty claim, New York’s general statute of limitations rules apply, imposing a six-year period on actions which have no specific limitation.
A cause of action based on negligent misrepresentation accrues on the date the alleged misrepresentation is relied upon by the plaintiff. In this case, Im would have relied on the alleged misrepresentation on the date he purchased Portrait at auction at Christie’s in May of 1991. Accordingly, this claim would have been time-barred as of May 1997 – long before Im brought suit.
Consequences of the Suit
It is of crucial importance that buyers of art of at least some value perform due diligence on their purchases in terms of title, authenticity and attribution either before or shortly after the time of purchase. Insofar as possible, a (prospective) buyer should promptly secure an independent authentication of a work of art and ensure through checking with the Art Loss Register or requiring the art merchant check with the Art Loss Register that the (prospective) art purchase is not registered as being lost or stolen. In addition, the (prospective) buyer might consider, for works which might have been confiscated during World War II, hiring an independent consultant to ensure that there are no red flags in the provenance of the work (such as, for example, a noted Jewish collector who owned the work during the 1930’s or 1940’s, followed by a questionable dealer). Above all, a buyer should not wait until he or she decides to sell the work to have due diligence performed: the passage of time can be a treacherous adversary, leaving the hapless buyer with no recourse.
- Judith Bresler, Art Law Expert
