Opinion
B157697.
10-30-2003
GILBERT N. MICHAELS, Plaintiff and Appellant, v. WILDENSTEIN & CO., INC., Defendant and Respondent.
A. Charles DellArio; Steiner and Associates and David Paul Steiner for Plaintiff and Appellant. Thelen Reid & Priest, Curtis A. Cole, Kenneth R. Pedroza and Jason W. Crowell for Defendant and Respondent.
A plaintiff who purchased fine art at the height of the market sued the art dealer after the market fell, alleging a variety of tort theories and seeking substantial damages. The case was tried to a jury, which unanimously rejected the plaintiffs claims and rendered its verdicts in favor of the art dealer. We reject the plaintiffs claims of error and affirm the judgment.
FACTS
A.
In the late 1980s, Gilbert Michaels, a successful businessman but a "novice" in the art business, decided to purchase fine art for resale because he believed that "impressionist paintings were getting prices that were just outrageous." To that end, Michaels first retained Gene Luntz, an art consultant whom Michaels later sued, alleging that Luntz had wrongfully accepted commissions from art sellers. Ultimately, Michaels retained Larry Ross as his agent to locate artwork, and agreed to pay Ross a commission of 5 percent of Michaelss purchase price plus 40 percent of any profit realized on resale. To ensure that Ross was representing only his interests, Michaels insisted, and Ross agreed, that Ross would not accept any compensation from any seller of artwork acquired by Michaels.
In mid-1989, Ross introduced Michaels to Philip Diotallevi, an art salesman employed by Wildenstein & Co., an established art retailer with a gallery in New York City that specializes in works by "European Old Masters," and impressionist and post-impressionist painters. Michaels and Diotallevi have different recollections about their meeting. According to Michaels, he told Diotallevi that he planned to open a gallery, that he was buying paintings for resale, and that he had an agreement with Ross that prevented Ross from accepting any compensation from a seller; according to Michaels, Diotallevi assured Michaels he would receive wholesale dealer prices. According to Diotallevi, Ross brought Michaels to Wildenstein as an ordinary customer in search of art, and Diotallevi did not know that Michaels was an "art dealer" or about any arrangement Michaels had with Ross (and it was not until May 1991 that Diotallevi learned that Michaels planned to open a gallery with Ross).
Ross had existing business and social relationships with Diotallevi. As Diotallevi put it, Ross "understood perfectly the importance of being on good terms with Wildenstein because when you bring from California [to New York] these rich, young people, movie producers, actors and what have you, and you come through the doors of Wildenstein and you are shown [a] fantastic amount of beautiful works, sculptures and everything, it impresses them, and that in the long run is good for Larry [Ross] because they will speak about it." Michaels knew about Rosss relationship with Wildenstein, and specifically retained Ross because he believed Wildensteins "close relationship" to Ross would give Michaels "access to works of art that were not available to the general public or to [Wildensteins] general clientele."
B.
Between 1989 and 1991, Michaels purchased four paintings from Wildenstein for a total cost of $2.54 million, as follows (the parenthetical names are those used by the parties at trial): In October 1989, Michaels paid $375,000 for Renoirs "Trois Grenades et Deux Pommes" (Three Pomegranates [and two apples], for which Wildenstein had paid $318,750); in October 1990, Michaels paid $490,000 for Albert Marquets "Femme Nue Debout Dans Un Atelier" (the Marquet Nude, for which Wildenstein had paid $112,000); in December 1990, Michaels paid $650,000 for Renoirs "LEtang a Essoyes" (the Renoir Landscape, for which Wildenstein had paid $475,000); and in May 1991, Michaels paid $ 1.025 million for Marquets "Pin a Saint Tropez" (the Marquet Pine). Michaels paid Ross the agreed 5 percent commission for each of these paintings. Unbeknownst to Michaels, Wildenstein paid Ross a $10,000 commission for the sale of Three Pomegranates, a $15,000 commission for the sale of the Marquet Nude, a $25,000 commission for the sale of the Renoir Landscape, and a $50,000 commission for the sale of the Marquet Pine.
C.
In the spring of 1992, Michaels and Ross opened a gallery (Visage Fine Arts or "La Galerie") in the Peninsula Hotel in Beverly Hills. Michaels offered the four paintings for sale for more than he had paid for them: Three Pomegranates, for $ 875,000 (a $500,000 markup); the Marquet Nude for $1.1 million (a markup of more than $600,000); the Renoir Landscape for $1.45 million (an $800,000 markup); and the Marquet Pine for $1.95 million (a markup of more than $900,000). By the summer of that year, when none of the paintings had been sold, Michaels contacted Diotallevi for marketing advice.
Diotallevi expressed doubt that Michaels could sell the paintings for more than he had paid for them (and undisputed evidence presented at trial shows the market for Impressionist paintings had significantly declined between 1989 and 1992). Michaels lowered his prices but the paintings still did not sell, and in late 1992, Michaels sold his interest in the gallery to Ross but kept the four paintings for himself.
D.
In June 1993, Michaels sued Wildenstein and others in federal district court in the Central District of California, but the case was transferred to the Southern District of New York later that year. In October 1995, the case was dismissed for lack of diversity jurisdiction. Later the same month, Michaels filed this action against Wildenstein, but the trial court disposed of the case by demurrers and summary judgment on various grounds, including the statute of limitations. Michaels appealed and we reversed. (Michaels v. Wildenstein & Co. (Mar. 30, 2000, B126656) [nonpub. opn.].)
In 1999, Michaels sold three of the paintings at auction: Three Pomegranates for $89,000; the Renoir Landscape for $272,000; and the Marquet Pine for $112,000. In 2000, Michaels sold the Marquet Nude for $50,000.
In 2001, the case was tried to a jury, with Michaels presenting evidence of the facts summarized above. His theory was that Wildenstein had sold the paintings to him at inflated prices, that Michaels had not known about the inflated prices, and that Wildensteins commission payments to Ross had contributed to the inflated pricing and to Michaelss decision to buy at the inflated prices. In closing argument, Michaelss trial counsel told the jurors that "[i]f Mr. Michaels had known [Ross] had been regularly and systematically and secretly paid by [Wildenstein], he wouldnt have bought these paintings and we wouldnt be here."
Wildenstein defended on the ground that the prices paid by Michaels were legitimate at the time they were paid. According to Wildensteins evidence, the decline in value occurred after Michaels purchased the paintings and as the result of an overall decline in the art market, not because the paintings were overpriced when Wildenstein sold them to Michaels, and not because Wildenstein paid commissions to Ross. Indeed, Wildensteins evidence showed that Ross negotiated reductions in Wildensteins prices for each of the paintings, and each painting was in Michaelss possession for months before the actual purchases were made, giving Michaels ample opportunity to obtain independent appraisals or other information about the prices.
By way of example, appraisals obtained by Michaels from Dena Hall, an independent appraiser, showed an increase in the value of the paintings after Michaels purchased them: Three Pomegranates, purchased by Michaels for $375,000 in October 1989, was valued by Hall at $600,000 in December 1990; the Marquet Nude, purchased by Michaels for $490,000 in October 1990, was valued by Hall at $675,000 in January 1991; the Renoir Landscape, purchased by Michaels for $650,000 in December 1990, was valued by Hall at $1.5 million in January 1991; and the Marquet Pine, purchased by Michaels for $1.025 million in May 1991, was valued by Hall at $1.5 million in June 1991. And although there was disagreement among the experts about the dates of the art markets decline (one identified the best years as 1989 and 1990, another said the market reached its peak in 1989, another in 1992), it was essentially undisputed that the market did decline and that dealers were forced to lower their prices by the time Michaels opened his gallery in 1992.
Wildenstein also established that it is customary for art dealers to pay commissions to buyers agents who act as intermediaries, as Wildenstein paid Ross, notwithstanding that the buyer is also compensating the agent. Indeed, Michaels was aware of this practice, as evidenced by his dealings with Gene Luntz (the art consultant who preceded Ross). The amounts vary from sale to sale and depend upon a number of factors, including the sale price and whether the painting is owned by the dealer or held on consignment, and the buyers representative is often paid out of the salesmans commission.
The jury (which was instructed on fraud by misrepresentation, fraud by concealment, negligent misrepresentation, and unfair business practices) returned its unanimous special verdicts in favor of Wildenstein, finding that it was not liable to Michaels for fraud, negligent misrepresentation, or unfair competition within the meaning of section 17200 of the Business and Professions Code. The trial court disposed of Michaelss remaining cause of action (alleging Wildenstein had paid "secret commissions" as prohibited by section 17045) by nonsuit, and (on the merits) disposed of Michaelss unjust enrichment claim in favor of Wildenstein. Michaels appeals from the judgment thereafter entered.
Undesignated section references are to the Business and Professions Code.
DISCUSSION
I.
Michaels contends his unjust enrichment cause of action sounded in quasi-contract and should have been tried to the jury, not to the court (an issue that arose when the court refused to instruct the jury on this theory because it presented an equitable claim), and that (as to this cause of action) the trial courts refusal to give that claim to the jury was error and reversible per se. We disagree.
Michaelss unjust enrichment cause of action did no more than allege his purchase of the four paintings for $2,540,000, his payment of commissions to Ross, his claim that, unbeknownst to him, Ross was also paid by Wildenstein, his claim that Wildenstein had "represented and warranted" to Michaels that the market value of the paintings was at least equal to the amounts he paid, and his assertion that, because the paintings were worth less than he paid, Wildenstein was unjustly enriched. This is no more than a restatement of Michaelss fraud claim, which the jury rejected in all of its guises — fraud by misrepresentation, fraud by concealment, and negligent misrepresentation. Had this purported "unjust enrichment" cause of action been submitted to the jury, the result most certainly would have been the same.
Aside from that, there is also the fact that no contract was pleaded or proved that would make the unjust enrichment claim one sounding in law rather than equity. Since that question must be decided by reference to the "gist" of the action as framed by the pleadings and proof rather than by the title affixed by the plaintiff (Paularena v. Superior Court (1965) 231 Cal.App.2d 906, 911-912), it is plain that Michaelss claim sounded in equity, not law. As the trial court observed, there was no express promise alleged, as would exist in an action in debt. (City Bank of San Diego v. Ramage (1968) 266 Cal.App.2d 570, 586-587; Mansfield v. Pickwick Stages (1923) 191 Cal. 129, 130-131.) As Michaels conceded at oral argument, he did not rescind or attempt to rescind his deal with Wildenstein, and he did not plead or pray for rescission, and his reliance on Philpott v. Superior Court (1934) 1 Cal.2d 512, a quasi-contract rescission case, is therefore misplaced. For these reasons, it is immaterial that an action sounding in quasi-contract is legal in nature.
It is equally plain that the relief Michaels sought by his unjust enrichment claim was equitable, not legal. He wanted a determination that, assuming no wrongdoing by Wildenstein, the company had nevertheless been unjustly enriched by the high purchase prices paid by Michaels — and thus should be ordered to reimburse Michaels for the difference between what he paid for the paintings and the prices he was able to get when he sold them. Indeed, Michaelss position (in his lawyers words) was that there did not "have to be fraud. It is something short of fraud. It is an alternative to fraud. In fact, if the jury were to find on fraud, [it could not] also find on unjust enrichment because [Michaels would then have] a remedy. Unjust enrichment steps in when the ordinary tort remedies dont work."
In short, Michaels had an adequate remedy at law by way of his tort claims, which he pursued and lost. His claim of unjust enrichment, such as it was, sounded in equity, not law, and it was properly resolved by the court rather than the jury.
II.
Michaels contends the trial court should not have resolved his unfair competition claim (based on his secret commission theory) by nonsuit. We disagree.
To prove a cause of action under section 17045, the plaintiff must prove (1) that a secret commission was paid, (2) that a competitor was injured, and (3) that the payment tended to destroy competition generally. (Diesel Electric Sales & Service, Inc. v. Marco Marine San Diego, Inc. (1993) 16 Cal.App.4th 202, 212-213; ABC Internat. Traders, Inc. v. Matsushita Electric Corp. (1997) 14 Cal.4th 1247, 1262.)
The trial court granted Wildensteins motion for nonsuit because Michaels did not present evidence to show that Wildensteins practice of paying commissions to buyers agents tended to destroy competition in the art market generally. As the trial court put it, "There is uncontradicted evidence that payments like those given to Ross were the standard in the art world. [& para;] [Michaels] himself was aware of them, and according to him took steps to avoid them in these transactions, but there is no evidence that such payments, while known in the industry as they are, have a [tendency] to destroy competition [in the art business. Michaels] has failed to offer sufficient evidence on that issue. . . ."
Michaels does not point to any evidence to suggest the trial court was mistaken, and simply ignores the "tends to destroy competition generally" element of his claim. The fact that Michaelss plan to sell the paintings for a profit failed simply does not show that Wildensteins payment of "secret commissions" tended to destroy competition generally or at all. (ABC Internat. Traders, Inc. v. Matsushita Electric Corp., supra, 14 Cal.4th at p. 1262.) Nonsuit was properly granted. (Carson v. Facilities Development Co. (1984) 36 Cal.3d 830, 838-839.)
III.
Ross did not appear at trial and the court allowed Wildenstein to use his deposition testimony (given while Michaelss claims against Wildenstein were still pending in federal court), finding that Ross was unavailable and that the prior testimony was admissible. Michaels claims this was error, and that the judgment must be reversed. We disagree.
A.
When Michaels first filed suit in the district court, Ross (along with Wildenstein) was named as a defendant, but Michaels settled with Ross before this state court action was filed. Ross was deposed before he settled.
Six months before trial, in response to Wildensteins interrogatories, Michaels identified Ross as a witness and gave his address in New York City. Closer to trial, in his witness list, Michaels identified Ross and again gave his address as New York City. When it became apparent at trial that Wildenstein had not been able to subpoena Ross, the court conducted a hearing pursuant to Evidence Code section 402 at which it considered evidence (declarations from the lawyer who represented Ross when he was still a party, and from a private investigator hired by Wildenstein) that established, if nothing else, that no one knew where to find Ross and that he was outside the courts subpoena power.
According to the investigator (a former FBI agent), who had Rosss social security number, birthdate, and other identifying information, Rosss most recent address was in Florida (where he had a current drivers license) or Nevada (where he had an expired license). According to Rosss former lawyer, who represented Ross until he settled with Michaels and was dismissed from the federal action, Ross did not and does not reside in California. Indeed, Ross lived in New York at the time his deposition was taken, and Michaelss lawyer had to obtain a commission before he deposed Ross in New York. And although the burden to establish unavailability was Wildensteins, not Michaelss, there is also the fact that Michaels himself had no idea where Ross was, and that Michaels had requested but failed to get Rosss address when he settled with him. Although Michaels claimed the showing was insufficient, he offered no evidence to the contrary, and he conceded that "all indications seem[ed] to be hes outside of the state," and that it "sound[ed] like hes unavailable." The trial court found Ross was unavailable and admitted his deposition testimony.
B.
Subdivision (u) of section 2025 of the Code of Civil Procedure provides that any "party may use for any purpose the deposition of any person . . . if the court finds [either that] the deponent resides more than 150 miles from the place of the trial [or] the deponent, without the procurement or wrongdoing of the proponent of the deposition for the purpose of preventing testimony in open court, is . . . absent from the trial . . . and the proponent . . . has exercised reasonable diligence but has been unable to procure the deponents attendance by the courts process."
We reject Michaelss contention that Wildenstein failed to show that it had exercised reasonable diligence and failed to show that Ross was unavailable. The determination of this issue is within the trial courts sound discretion and will be affirmed absent a clear abuse of that discretion (Sanchez v. Bargues & Sons Mortuaries (1969) 271 Cal.App.2d 188, 194; Peat, Marwick, Mitchell & Co. v. Superior Court (1988) 200 Cal.App.3d 272, 288), a showing that has not been made by Michaels on this appeal. To the contrary, Michaels offers no explanation about what more Wildenstein could or should have done, and we cant imagine what it might have been. An experienced investigator was hired and given all the information available, and Rosss only contact — his former lawyer — confirmed that Ross did not live in California. Michaelss suggestion that the declarations submitted by the investigator and lawyer were hearsay is interesting but irrelevant in light of Michaelss failure to cite any authority to support his apparent assumption that, in a civil case, he was entitled to cross-examine the witnesses on this ancillary issue.
C.
Independent of Rosss unavailability, we reject Michaelss claim of reversible error because we are satisfied that Rosss presence could not possibly have affected the outcome of this trial. In civil cases, reversible error exists only where there has been a miscarriage of justice of the sort sufficient to persuade the reviewing court that, based on the entire record, it is "reasonably probable" that, absent the error, the result would have been more favorable to the appellant. (People v. Rains (1999) 75 Cal.App.4th 1165, 1170.)
Michaels has not suggested what it is that would have been different if Ross had been present, and he certainly has not suggested that Rosss testimony at trial would have been more favorable to Michaels than was the deposition testimony. More to the point, we presume (as we must) that, had Ross been subject to subpoena and duly served, he would have appeared as required and testified in conformance with his earlier testimony — and we certainly will not presume that his settlement with Michaels would have changed the substance of his sworn testimony. In light of the uncontroverted evidence about the decline in the art market during the years in question, we simply cannot see how Rosss live testimony could have affected the outcome of this trial — particularly since Ross had been deposed five times before he settled with Michaels.
IV.
In his opening brief, Michaels claims the trial court should have instructed the jury on his theory that Wildenstein conspired with Ross to breach Rosss fiduciary duty to Michaels. This issue is expressly abandoned in Michaelss reply brief, and we therefore do not discuss it. Had we reached the claim, we would have rejected it for the reasons we explained in Everest Investors 8 v. Whitehall Real Estate Limited Partnership XI (2002) 100 Cal.App.4th 1102, 1107.
V.
The trial court awarded costs to Wildenstein as the prevailing party. (Code Civ. Proc., §§ 1032, 1033.5.) As he did in the trial court in a motion to tax costs, Michaels challenges the trial courts award of the cost of depositions taken in the federal action rather than in this action, on the theory that such costs are not statutorily authorized and thus not recoverable by the prevailing party. (See Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 774.) Michaels says the pre-1996 deposition costs should have been claimed by Wildenstein in the federal action (where Wildenstein was also the prevailing party when its motion to dismiss on diversity grounds was granted). (Fed. Rules Civ. Proc., rule 54(d).) Michaels now takes it one step further and also contends that, by failing to seek costs in the federal action at the time it was dismissed, Wildenstein waived or forfeited its right to those costs. (UAP-Columbus JV 326132 v. Nesbitt (1991) 234 Cal.App.3d 1028, 1038; So. Dist. N.Y., Local Civil Rules, rule 54.1.) Michaels also says this is a matter of subject matter jurisdiction, and that the trial court had no jurisdiction to do what it did. We disagree.
Although Michaels claims there was no agreement between the parties "to transfer costs from the federal litigation to this action," we consider it far more likely that, as Wildenstein claims, the parties "anticipated that the New York depositions would be necessary in connection with Michaelss state case," as evidenced by Michaelss assertion on the earlier appeal that the federal court "recognized that the discovery accomplished in the federal action would be valuable in a state court action, which the federal court expected to be filed." As Wildenstein also notes, we accepted Michaelss assertion, finding it "obvious that the district judge understood that her ruling would not terminate this dispute, and that Michaelss claim would simply proceed in a different forum. After the court announced its intent to dismiss, Wildensteins lawyer mentioned that there were `some pending depositions and suggested that they might all be `moot. The judge disagreed, commenting that, `I dont see why. You are going to need discovery wherever you go." (Michaels v. Wildenstein & Co., supra, B126656, typed opn., p. 9.)
Under these circumstances and because the depositions were plainly "necessary" within the meaning of Code of Civil Procedure section 1033.5, subdivision (a)(3) — as evidenced by Michaelss use of two of the deposition transcript — the deposition costs were properly awarded in this case. (Ladas v. California State Auto. Assn, supra, 19 Cal.App.4th at p. 774 [an item not specifically allowable nor expressly prohibited under the cost statute may nevertheless be recoverable in the discretion of the court if reasonably necessary to the conduct of the litigation rather than merely convenient or beneficial to its preparation].)
DISPOSITION
The judgment is affirmed. Wildenstein is awarded its costs of appeal.
We concur: SPENCER, P.J. and MALLANO, J.