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In Pagliai v. Del Re, No. 99 Civ. 9030 (DLC), 2001 WL 220013 (S.D.N.Y. March 7, 2001), the court intimated that a contract was not required for a bailment to exist.
Summary of this case from Rozsa v. May Davis Group, Inc.Opinion
99 CIV. 9030 (DLC).
March 7, 2001.
J. Joseph Bainton, Bainton McCarthy Siegel, LLC, New York, NY., Jules A. Epstein, Jules A. Epstein, P.C. Garden City, NY., Attorneys for Plaintiff.
Attorney for Defendant Marisa del Re Anna-Lisa Bonventre, Hoey, King, Toker Epstein, New York, NY., Attorney for Defendants James Goodman, James Goodman Galleries, Inc., and Christie's Inc.
OPINION ORDER
Plaintiff Francesca Pagliai ("Pagliai") filed this diversity action against Marisa del Re ("del Re") on August 19, 1999, to recover the value of a painting. Plaintiff filed an amended complaint on April 26, 2000, joining James Goodman ("Goodman") and James Goodman Galleries, Inc. (collectively, "the Goodman Defendants") as well as Christie's, Inc. ("Christie's"). A second amended complaint was filed on May 22, 2000.
The plaintiff brings six causes of action. As against del Re, she alleges conversion and constructive trust. As against the Goodman Defendants and as against Christie's, she alleges conversion and negligence. She demands money damages.
The parties have agreed that this is a non-jury matter.
Pursuant to this Court's procedures in non-jury cases, and without objection by the parties, the direct testimony of the witnesses was submitted by affidavit. Plaintiff submitted her own affidavit. Defendants submitted the affidavits of del Re, Goodman, and Sarah Lidsey, Vice President and Specialist in Christie's Old Masters Paintings Department.
While the defendants asserted several affirmative defenses in their answers, those defenses were narrowed as of the final pretrial conference on January 30, 2001. Del Re asserts a statute of limitations defense. The remaining defendants claim statute of limitations, failure to state a prima facie case of negligence, and arbitral immunity for Goodman.
These defendants also included seven cross-claims against del Re in their answer. None of these cross-claims, however, are included in the amended joint pretrial order and are therefore not now considered by the Court.
At the final pretrial conference, the parties consented to submit this case on the basis of the affidavits and documentary exhibits. In light of evidence submitted in this case, the following constitutes this Court's Findings of Fact and Conclusions of Law.
FINDINGS OF FACT
At issue in this lawsuit is a 15th Century painting by Master Cima Da Conegliano ("Cima") entitled "The Madonna and Child" ("Painting") acquired by Dr. Bruno Pagliai of Mexico in 1952. After her father's death in 1983, the Painting became the property of Pagliai's brother. At her brother's request, Pagliai took the painting to New York sometime after March 1983, where she was met by a representative from Sotheby's who took the Painting for appraisal. Soon thereafter, the Painting was stored at Marisa del Re Gallery ("MDRG"). When her brother died in 1984, intestate succession named Pagliai as the "sole and universal heir" of his estate.
Del Re's contention that she purchased the Painting from Pagliai's brother is not credible. According to del Re, Pagliai's brother delivered the Painting to her gallery for consignment for sale. They executed a consignment agreement at that time and later, after unsuccessful efforts to sell the Painting, del Re bought the Painting at an agreed upon price of $25,000. Del Re, however, has been unable to locate any documents reflecting this purchase.
The document concerning intestate succession is admissible under Rule 902(3), Fed.R.Evid.
In April 1996, del Re gave the Painting to Goodman to hold as collateral in a dispute between MDRG and International Art Investors ("IAI") concerning money del Re owed for art work received from IAI. Goodman was arbitrating the dispute pursuant to an Arbitration Agreement ("Agreement") of March 21, 1996. The Agreement stated that MDRG would post collateral with Goodman to secure the amount which Goodman determined due to IAI, "together with such assurances as are required by Mr. Goodman that the collateral will be of a value not less than the amount determined to be due and owing to IAI and will be free and clear of all liens, encumbrances and claims of third parties." Del Re gave Goodman her verbal assurance that the Painting was free and clear of any encumbrances, but Goodman did not ask for and del Re did not provide to him any record or proof of ownership of the Painting.
Goodman researched the Painting by reviewing the Monograph on Cima by Peter Humfrey ("Humfrey"), the "known scholar" on Cima. Humfrey's Monograph is considered a Catalogue Raisonne, that is, an authoritative text on an artist that contains the provenance, or ownership history, of the artwork. It indicates that the Nicholas Brady collection acquired the Painting in 1913.
The most recent entry reads "sold by Acquavella Galleries, New York, to private collection, Mexico, 1952." Goodman also consulted Mayer International Auction Records to determine an approximate value.
On April 19, 1996, Goodman issued an Arbitration Award ("Award") in which he found that MDRG owed to IAI FFR 2,069,150, or approximately $413,650, to be paid by October 19, 1996. In the event of default, the Award provided that Goodman would deliver the collateral to IAI. Further, the Award specified that Goodman would oversee the sale of the collateral and that del Re would cooperate fully with [IAI] in the sale of the collateral, including but not limited to executing any and all documents which may be required in connection with the sale as owner or title holder, providing evidence of Marisa del Re's title to and of the provenance and authenticity of the collateral, and providing assurances as may be required that no party other than IAI has a security interest in or lien on said collateral, and that all works are free and clear of any encumbrances.
Del Re failed to pay the Award within the time stipulated.
By letter of April 26, 1996, del Re confirmed that she would allow James Goodman Gallery to sell the collateral she put up against the Award. She valued the Painting at $80,000.
Pursuant to a consignment agreement between James Goodman Gallery and Christie's Inc., dated November 18, 1996, Goodman consigned the Painting to Christie's for public auction. Among other things, the consignment agreement included a clause by which James Goodman Gallery, as the seller, represents and warrants that (i) Seller has the right and title to consign the Property for sale, (ii) the Property is, and until the completion of sale by Christie's will be, free and clear of all liens, claims and encumbrances of others or restrictions on Christie's right to offer and sell the Property.
In preparation for the auction, Christie's researched the Painting by reviewing the materials on Cima at the Frick Library and reviewing Humfrey's Monograph. Christie's also forwarded a photo and transparency of the Painting to Humfrey and sent him a letter requesting information about various technical aspects of the Painting's creation, and received a response with an opinion as to the construction of the Painting and the degree to which Cima actually contributed to its creation. Finally, Christie's forwarded a copy of the Christie's Catalogue containing the Painting to the Art Loss Register, which determines if any of the property offered for sale has been registered as lost or stolen.
The Art Loss Register did not contact Christie's about the Painting.
Goodman did not share with Christie's the identity of del Re, and Christie's did not inquire as to whether Goodman or his "client" had proper title. Christie's listed the Painting in its own catalogue, dated January 31, 1997, as valued at between $50,000 and $80,000.
On January 31, 1997, Christie's sold the Painting at auction for $65,000 to a purchaser from Tokyo, Japan, and authorized it for release to the purchaser on February 14, 1997. The proceeds of the sale, less Christie's' commission, were applied to the Award owed by MDRG to IAI. Goodman received no commission on the sale.
In January 1997, Pagliai spoke with del Re by telephone to ask for the return of the Painting. She had forgotten about the Painting after her brother's death and only remembered its existence at this time. Del Re indicated that she would get back to Pagliai. Pagliai, however, never heard from del Re again despite leaving many more messages. Pagliai then filed this lawsuit.
CONCLUSIONS OF LAW
A. Subject Matter Jurisdiction
This case is brought pursuant to diversity jurisdiction. By Memorandum Opinion and Order of January 28, 2000, this Court denied del Re's motion to dismiss for lack of subject matter jurisdiction on the grounds that the amount in controversy is less than $75,000. Pagliai v. Marisa del Re, No. 99 Civ. 9030 (DLC), 2000 WL 122142 (S.D.N.Y. Jan. 31, 2000). Defendant del Re renews her motion, and the remaining defendants join in the motion.
A party invoking diversity jurisdiction "has the burden of proving that it appears to a `reasonable probability' that the claim is in excess of the statutory jurisdictional amount."
Chase Manhattan Bank, N.A. v. American Nat'l Bank and Trust Co. of Chicago, 93 F.3d 1064, 1070 (2d Cir. 1996) (quoting Tonghook America, Inc. v. Shipton Sportswear Co., 14 F.3d 781, 784 (2d Cir. 1994)). The amount in controversy is determined at the commencement of the action, and the amount claimed by the plaintiff "controls if the claim is apparently made in good faith." Id. Dismissal is justified only where it "`appear[s] to a legal certainty that the claim is really for less than the jurisdictional amount.'" Id. (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938)). The Court may look to the pleadings and to discovery to determine whether the plaintiff acted in good faith as of the filing date. Id.; see also Tonghook, 14 F.3d at 785. A case may not be dismissed where events occurring after the filing date reduce the recovery amount below the statutory limit. Id. at 1071. The case may, however, be dismissed, if, from the proofs, the court is satisfied to a [legal] certainty that the plaintiff never was entitled to recover [the] amount [claimed], and that his claim was therefore colorable for the purpose of conferring jurisdiction.
Id. at 1070 (citation omitted). Any doubt regarding the right of recovery "should be resolved . . . in favor of the subjective good faith of the plaintiff," id., and the "legal impossibility of recovery must be so certain as virtually to negate the plaintiff's good faith in asserting the claim," Tonghook, 14 F.3d at 785 (citation omitted).
In its Opinion of January 31, 2000, this Court held that because the Painting is a unique object, its value would be determined at the time of trial. Pagliai, 2000 WL 122142, at *1.
This Court noted that del Re had cited no authority for the proposition that the auction price itself is "the exclusive method for determining market value." Id. at n. 1.
Plaintiff has not chosen to submit any evidence at trial regarding the value of the Painting beyond the documentary evidence created in connection with the auction of the Painting.
Plaintiff provided the Christie's catalogue appraisal of $50,000 to $80,000, as well as a letter from del Re indicating that, as of April 1996, she estimated the Painting's value at $80,000.
See Dunand v. Bowling Green Storage Van Co., 755 F. Supp. 106, 109 n. 5 (S.D.N.Y. 1991) (finding catalogue appraisal more probative of value than auction sale price which "reflects an isolated transaction that may be idiosyncratic rather than an accurate reflection of the general market"); see also Cristallian S.A. v. Christie, Manson Woods Int'l, Inc., 502 N.Y.S.2d 165, 173 (1st Dept. 1986) (noting that both "[a]ppraisals and bona fide sales are indicative of value and may serve as the basis of a damage award").
This Court cannot find to a "legal certainty" that the Plaintiff's claim was not brought in good faith nor that the value of the Painting at the time her Complaint was filed amounted to less than $75,000. Accordingly, this Court has subject matter jurisdiction over this dispute.
B. Choice of Law
The parties do not address choice of law but do rely on New York law in making their arguments. In a diversity action, the choice of law analysis is based on the forum state's choice of law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941). In Babcock v. Jackson, 240 N.Y.S.2d 743, 749 (N.Y. 1963), the New York Court of Appeals adopted a flexible approach to choice of law, focusing on the law of the state with the most significant interest in the dispute. See also Padula v. Lilarn Properties Corp, 620 N.Y.S.2d 310, 311 (N.Y. 1994). In this case, plaintiff is a citizen of Mexico, while defendants include an individual who is a citizen of New York as well as two corporations incorporated under the laws of New York with their principal places of business in New York. The critical events in this action, forming the basis of the plaintiff's claims, occurred in New York. In conjunction with the parties' reliance on New York law in their submissions on this motion, the Court concludes that New York law applies in this case. See, e.g.,
Walter E. Heller Co. v. Video Innovations, Inc., 730 F.2d 50, 52 (2d Cir. 1984) ("[I]n the absence of a strong countervailing public policy, the parties to a litigation may consent by their conduct to the law to be applied.").
C. Defendant Del Re
Pagliai alleges that del Re converted the Painting to her own use and seeks a constructive trust to prevent del Re's unjust enrichment by virtue of her conversion. Before turning directly to these causes of action, it is useful to describe the law of bailment, the legal doctrine that defines the Pagliai/del Re transaction.
1. Bailment When the Painting was left in the care of del Re she became its bailee. A bailment is the delivery of personalty for some particular purpose, or on mere deposit, upon a contract, express or implied, that after the purpose has been fulfilled it shall be redelivered to the person who delivered it, or otherwise dealt with according to his directions, or kept until he reclaims it, as the case may be.
Chilewich Partners v. M.V. Alligator Fortune, et al., 853 F. Supp. 744, 756 (S.D.N.Y. 1994) (citation omitted). The elements of a bailment are "intent to create the bailment, delivery of possession of the bailed items, and acceptance of the items by the bailee." Id. The bailee "need not consent or voluntarily assume the status of bailee." Weyerhaeuser Co. v. Israel Discount Bank of New York, 895 F. Supp. 636, 648 n. 10 (S.D.N.Y. 1995). Rather, it is "the element of lawful possession, however created, and the duty to account for the thing as the property of another that creates the bailment." Martin v. Briggs, 235 N.Y.S.2d 184, 187 (1st Dep't 1997) (citation omitted). A bailment "does not necessarily and always, though generally, depend upon a contractual relation." People v. Wilson, 711 N.E.2d 633, 636 (N.Y. 1999) (citation omitted). Where the bailment relationship exists as an implied contract, "the rights and liabilities of the parties must be determined . . . under the general principles of law and the surroundings and attending circumstances." Zurich Insurance Group v. Grandurismo, Inc., No. 00 Civ. 980 (AGS), 2000 WL 1677941, at *3 (S.D.N.Y. Nov. 8, 2000) (citation omitted). As a bailee, therefore, del Re had the duty to account for the Painting and to return it to Pagliai when requested.
2. Conversion Plaintiff has shown that del Re unlawfully converted the Painting. Under New York law, conversion is any unauthorized exercise of dominion or control over property by one who is not the owner of the property which interferes with and is in defiance of a superior possessory right of another in the property. Schwartz v. Capital Liquidators, Inc., 984 F.2d 53, 53-54 (2d Cir. 1993) (per curiam) (citation omitted). See also Republic of Haiti v. Duvalier, 626 N.Y.S.2d 472, 475 (N.Y.App.Div. 199 5).
To state a valid claim for conversion, plaintiffs "must allege acts that are unlawful or wrongful as distinguished from acts that are a mere violation of contractual rights." Fraser v. Doubleday Co., 587 F. Supp. 1284, 1288 (S.D.N.Y. 1984) (citing 23 N.Y.Jur.2d § 24). Conversion requires "the exercise of unauthorized dominion and control to the complete exclusion of the rightful possessor." Philip Wilson Publishers Ltd. v. Rizzoli Int'l Publications, Inc., No. 95 Civ. 8674 (DLC), 1996 WL 209944, *3 (S.D.N.Y. Apr. 29, 1996) (citation omitted). Such interference with possessory rights must be intentional. See, e.g., Van Brunt v. Rauschenberg, 799 F. Supp. 1467, 1473 (S.D.N.Y. 1992) (citing Kahn v. Crames, 459 N.Y.S.2d 941 (3d Dep't 1983)); see also Restatement (Second) of Torts, § 222 A(1) (1965). Nonfeasance or negligence is generally inadequate to establish exercise of unauthorized dominion or control over a chattel that gives rise to a claim for conversion. See, e.g., 23 N.Y.Jur.2d, Conversion, and Action for Recovery of Chattel, § 23 (1982); Restatement (Second) of Torts, § 224 (1965).
Del Re converted the Painting when she gave it to Goodman as collateral in April 1996, with the representation that the Painting was hers. Knowing that she did not own the Painting, del Re nevertheless intentionally exercised unlawful control over the Painting.
3. Statute of Limitations Pagliai's action for conversion, however, is barred by the Statute of Limitations. Under New York law, the statute of limitations for conversion is three years. N.Y.C.P.L.R. § 214(3) (McKinney 1990). An action is commenced when the summons and complaint are filed. N.Y. Civ. Prac. L. R. § 304, amended by L. 1992, c. 216, § 4 (McKinney 1993); see also Chan v. Mui, No. 92 Civ. 8258 (MBM), 1993 WL 427114, at *5 (S.D.N.Y. Oct. 20 1993).
Where a plaintiff knows that a defendant has possession of the property, she has only a single cause of action for conversion, which generally accrues when the defendant began "commercially exploiting" the property as its own. Songbyrd v. Estate of Grossman, 206 F.3d 172, 182 (2d Cir. 2000) (citation omitted); see also Sporn v. MCA Records, Inc., 58 N.E.2d 1324, 1327 (N.Y. 1983). Under this test, the lawsuit was filed after the statute of limitations had run, that is, more than three years after del Re began to use the Painting as her own by giving it to Goodman to hold as collateral in connection with the IAI dispute.
In a bailment of "infinite" rather than fixed duration, however, the Statute of Limitations begins to run against a bailee only when the bailor makes a demand for the chattel's return and the demand is refused. Rahanian v. Ahdout, 694 N.Y.S.2d 44, 47 (1st Dep't 1999). The demand, however, must be made "within a reasonable time." Id. (citation omitted). An owner "`cannot unreasonably delay making demand upon the person in possession of that property.'" Continental Casualty Co. v. Stronghold Insurance Co., 77 F.3d 16, 21 (2d Cir. 1996) (citing Solomon R. Guggenheim Found. v. Lubell, 569 N.E.2d 426, 430 (N.Y. 1991)).
Del Re and Bruno Pagliai entered into a bailment of "infinite" duration with no specified date of retrieval. The plaintiff made her demand to del Re in January 1997, and filed her complaint less than three years later, on August 19, 1999.
The plaintiff waited to make her demand, however, fourteen years after the Painting was left with del Re. The length of Pagliai's delay in making — the demand even in the context of a bailment of infinite duration — is unreasonable. Pagliai's attempt to excuse this delay by her explanation that she forgot the Painting is unsuccessful.
2. Constructive Trust Pagliai's alternative theory of recovery against del Re is for a constructive trust. A constructive trust is an equitable remedy under New York law, designed to "prevent unjust enrichment, although unjust enrichment does not necessarily implicate the performance of a wrongful act." Counihan v. Allstate Insurance Co., 194 F.3d 357, 361 (2d Cir. 1999). To impose a constructive trust, the court must identify a party who is holding property "under such circumstances that in equity and good conscience he ought not to retain it." Id. (citation omitted). New York law identifies four elements of a constructive trust: (1) a confidential or fiduciary relationship; (2) a promise; (3) a transfer in reliance thereon; and (4) unjust enrichment. Id. at 362. New York law, however, does "not insist that a constructive trust must fit within [this] framework." Id.
Rather, the factors serve as "important guideposts" but the constructive trust doctrine is equitable in nature and should not be "rigidly limited." Id. (citation omitted); Lines v. Bank of Am. Nat'l Trust Sav. Ass'n, 743 F. Supp. 176, 180 (S.D.N Y 1990). Consequently, the lack of fiduciary relationship does not defeat the imposition of a constructive trust. Counihan, 194 F.3d at 362; In re Koreag, 961 F.2d 341, 353 (2d Cir. 1992).
Pagliai has established the existence of a constructive trust. The Painting was left in del Re's custody in reliance on her implicit representation that it would be safe to do so.
Using the Painting to satisfy her debt against IAI allowed del Re to reap the benefits of property which did not belong to her.
Accordingly, this Court imposes a constructive trust on the amount of debt which del Re satisfied by using the Painting.
Plaintiff's claim for constructive trust is not barred by a statute of limitations defense. Under New York law, a claim for constructive trust is governed by a six-year statute of limitations, running from "the occurrence of the wrongful act or event which creates the duty of restitution." Dolmetta v. Uintah Nat'l Corp., 712 F.2d 15, 18 (2d Cir. 1983); see also N YC.P.L.R. § 213(1) (McKinney 1990); Quiroga, S.L. v. Fall River Music, Inc., No. 93 Civ. 3914 (RPP), 1998 WL 851574, at *34 (S.D.N.Y. Dec. 7, 1998).
D. Goodman Defendants and Christie's
The plaintiff alleges that the Goodman Defendants unlawfully converted the Painting to their own use by placing it up for auction and that Christie's unlawfully converted the Painting by selling it at auction on January 31, 1997. The plaintiff further alleges that these defendants are guilty of negligence for failure to verify ownership of the Painting.
1. Conversion Neither the Goodman Defendants nor Christie's are liable for conversion. No evidence has been presented that these defendants intentionally interfered with the plaintiff's rights.
2. Negligence An action for damages for negligence requires proof of: (a) a duty; (b) a breach of duty; and (c) actual damages "proximately caused by the breach of the duty." Integrated Waste Servs., Inc. v. Akzo Nobel Salt, Inc., 113 F.3d 296, 299 (2d Cir. 1997). The Goodman Defendants and Christie's raise a statute of limitations defense.
Pursuant to Section 214(6), N.Y.C.P.L.R., a cause of action for negligence must be filed within three years of the date on which injury first occurs. See also Iacobelli Constr., Inc. v. County of Monroe, 32 F.3d 19, 27 (2d Cir. 1994); Ackerman v. Price Waterhouse, 620 N.Y.S.2d 318, 320-21 (N.Y. 1994). Under New York law, the statute of limitations begins to run "from the time when liability for wrong has arisen even though the injured party may be ignorant of the existence of the wrong or injury."
Nigerian Nat'l Petroleum Corp. v. Citibank, N.A., No. 98 Civ. 4960 (MBM), 1999 WL 558141, at *4 (S.D.N.Y. July 30, 1999). The claim for negligence against the Goodman Defendants accrued upon the execution of the consignment agreement with Christie's on November 18, 1996. The claim for negligence against Christie's accrued when it sold the Painting at auction on January 31, 1997.
Because the plaintiff joined these defendants more than three years thereafter — on April 26, 2000 — her negligence claims are time barred.
While plaintiff has brought a claim for negligence, she relies on the law regarding replevin in her argument regarding statute of limitations, citing Solomon R. Guggenheim Found., 569 N.E.2d 426 (N Y 1991). Since this litigation, including the pleadings, was based on the plaintiff's negligence claim, she cannot avoid the statute of limitation bar by changing her theory of recovery at trial.
CONCLUSION
Pagliai's claims of conversion and negligence are denied. A constructive trust is imposed on del Re in the amount by which her debt against IAI was reduced by virtue of the Painting's sale. The plaintiff shall submit a proposed judgment on notice within ten days.SO ORDERED: