Establishing Fine Art Good Title

Establishing Fine Art Good Title

The Concern of Theft or Forgery
Group News posted in on 5 May 2014| comments
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An area of concern for appraisers exists when, in searching the provenance of a painting, there are breaks in the chain of ownership. This issue should prompt the appraiser to consider the possibility of misrepresentation or fraud. Although appraisals are not intended to be certificates of authenticity, where fakery or impeachable title is even considered after proper and thorough research, i.e., checking the files of the Art Loss Register or the International Foundation for Art Research, this question must be addressed in the appraisal and must be reflected in the valuation conclusion. Care in this area is obvious in that mere questions concerning attribution or authenticity will have a chilling effect on the immediate value.

Because of the seriousness that a negative imprimatur has on current value, the law has established statutes of limitations concerning both the action to recover stolen works (replevin) and actions to collect damages for unlawful control (conversion). In many states their statute of limitations relating to art objects begins running when the possessor, lawfully or unlawfully, gains possession. In cases concerning the original owner or artist this can create a heavy and undue burden. The original owner operates under social as well as time constraints relating to finding their art object that was either stolen or lost.

In the statute of limitations area, only California has a three year statute which begins with the “discovery of the whereabouts” of the item. The remaining states, New York included, use one of three approaches: the demand and refusal rule, the laches approach, and the discovery rule.

In applying the demand and refusal rule, in Menzel v. List, it is stated that at the point in time of the demand by the original owner and the refusal by the current possessor, the clock for the statute of limitations begins to run. This rule, however, was modified because originally, in the case of theft, no demand was necessary and the time began to run immediately in favor of the thief. The rule was then again modified requiring that the demand not be made with unreasonable delay, say 40 years, and that the original owner be required to use due diligence to locate the stolen property.

Looking at the the laches approach, this is New York’s current law, as exhibited in Guggenheim v. Lubell, and then Hoelzer v. Stamford. In neither of these cases of lost or stolen art works is there a due diligence requirement affecting the running of statute of limitations in actions for repossession. The downside to this approach is the requirement that the new or current owners defense in order to retain their ownership, using the doctrine of laches, requires that they must prove 1) the original owners unreasonable delay in bringing suit and 2) harm to the purchaser resulting from the delay. This defense is both time consuming and extremely expensive.

The discovery rule is used in California, New Jersey, Indiana, Ohio, Pennsylvania and Oklahoma where the court determines when a diligent owner would or should have discovered the stolen property for purposes of beginning the running of the statute of limitations. In O’Keefe v. Snyder, O’Keefe’s cause of action began accruing after a 30 year time period when she first found out, or reasonably should have been able to find out, through the exercise of due diligence, the identity of the possessor of her stolen paintings. Georgia O’Keefe sued a bona fide purchaser in 1976 for reclamation of three paintings stolen in 1946. Over the years O’Keefe made casual and sporadic attempts to find the paintings which ultimately turned up in a gallery in 1975. The New Jersey Supreme court noted that: O’Keefe’s cause of action ensued when she first knew, or reasonably should have known, through the exercise of due diligence, of the cause of action, including the identity of the possessor of the paintings.”

In Helen Charash v. Oberlin College, applying Ohio law, the court found a cause of action for replevin or conversion must be brought within four years of the start of accrual, which action does not accrue until the “wrongdoer is discovered.” The obvious downside to the discovery rule is the list of relevant factors that come into play and the inability of the owner/purchaser to own definitive title to the painting as there is no definitive date from which the limitations period begins to run. As with laches, the time and cost involved in the litigation process is yet another “downside”.

In the realm of theft and forgery, and, parenthetically, touching on the issue of warranty, in Tunick v. Kornfeld, when a Picasso signature on a print was questioned and the dealer, Kornfeld, offered to replace the print in question with another Picasso with “good signature and of equal value”, the federal district court of New York determined that “two prints by the same artist and even from the same plates, were not interchangeable.” This would serve to suggest that comparables, that are almost clones, are not necessarily equal in value. This finds that experts may often rely on one-another’s warranties and so suggests that the appraiser, who is normally less expert than those cited, must be wary of reliance on just one, or too few, comparables and the warranties that follow the sales.

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