Opinion
601995-2007.
Decided January 23, 2008.
Jon Paul Robbins, Esq., McLaughlin Stern LLP, New York, NY, for Plaintiff.
Melvyn R. Leventhal, Esq., New York, NY, for Defendant Gasiunasen Gallery of Palm Beach, Inc.
Victor M. Metsch, Esq., Colleen Dalton, Esq., Hartman Craven LLP, New York, NY, for Defendant Nahum Gelber.
In this lawsuit, plaintiff Alexandre Van Damme seeks enforcement of a contract by which he attempted to buy a painting by Gerhard Richter.
The complaint alleges that an art dealership called Ticolat Fine Art entered into a Contract of Sale, dated January 31, 2007, to buy Richter's painting entitled "A.B. Diffus" for 2 million (then the equivalent of $2.6 million) plus commissions (the "Contract"). The Contract was signed by Ticolat as "Purchaser" and Gasiunasen Gallery of Palm Beach, Inc. as "Seller by Seller's Agent." The first paragraph of the Contract says that "Seller, acting by and through Seller's Agent, agrees to sell [the painting] to Purchaser. . . . Seller understands that Purchaser's purchase is conditioned upon performance by Purchaser's client, the ultimate purchaser." The Contract provided that New York law would govern the transaction and that the parties consented to the exclusive jurisdiction of the state and federal courts sitting in New York.
All dates in this memorandum are in 2007, unless otherwise noted. Citations to the pleadings and factual submissions are provided where a statement is particularly important to an issue in controversy.
On the same day, Ticolat executed a bill of sale with Van de Weghe Fine Art, LLC of New York City, in which Van de Weghe Fine Art agreed to buy the painting from Ticolat for $2.9 million, "without condition or reservation of any kind." (Compl. Ex. 3, at 1.) But Van de Weghe Fine Art was not the ultimate purchaser either; it was acting as the agent of plaintiff, the real buyer.
The Contract provided that New York law would govern the transaction and that the parties consented to the exclusive jurisdiction of the state and federal courts sitting in New York.
According to the complaint, Gasiunasen itself did not own the painting; it was acting as the agent for Nahum Gelber, the real owner of the painting. Ticolat acted as intermediary between Gasiunasen and the purchaser.
According to the complaint, a week before the Contract was executed, Christophe Van De Weghe, the owner of Van de Weghe, Ltd., acting on behalf of plaintiff, inspected the painting at an apartment in Toronto that belonged to Gelber. The painting passed Van De Weghe's inspection, and Ticolat and Gasiunasen agreed in principle on the terms of the sale. Gasiunasen issued an invoice to Ticolat, and plaintiff wired $2.9 million to Van de Weghe.
The complaint alleges that, on February 5, 2007, Van de Weghe wired plaintiff's $2.9 million to an escrow agent, who then wired $2.71 million to Gasiunasen; this amount included the purchase price of 2 million plus Gasiunasen's $100,000 commission. Later the same day, according to the complaint, Gasiunasen wired $2.61 million to Gelber's bank account in Monaco and delivered a bill of sale for the painting, stating "paid in full," to Ticolat, for delivery to plaintiff.
The complaint alleges that, on February 7, a different Richter painting was sold at a Sotheby's auction in London for over $5.55 million.
According to an affidavit by Peter Stern, the escrow agent, the funds wired by Gaiunasen to Gelber in Monaco did not arrive before the Sotheby's sale, because they were wired to the wrong bank account by mistake. The glitch was discovered by at least February 9. When the funds finally made their way to Gelber's account on February 12, Gelber rejected the wire transfer.
On about February 13, Gasiunasen's bank returned the money to the escrow agent, who in turn wired $2.71 million back to Van de Weghe, who then wired the $2.9 million back to plaintiff, according to an affidavit by Christophe Van De Weghe.
The gravamen of the complaint is that defendants have not delivered the painting to plaintiff, who claims to be its owner. Ticolat and Van de Weghe have assigned their rights in this matter to plaintiff. Plaintiff has sued for conversion, specific performance of the Contract, breach of contract, and attorneys' fees under the Contract. Both defendants moved to dismiss.
Gelber's Motion to Dismiss
Gelber, who says that he is a Canadian citizen and resides in the Principality of Monaco, seeks dismissal under CPLR § 3211(a)(8), because plaintiff has failed to make a prima facie case for this Court's personal jurisdiction over him.
Since it is undisputed that Gelber does not reside in New York and has not been served in New York, personal jurisdiction is warranted only if Gelber's contacts and activities in New York confer jurisdiction under the long-arm statute, CPLR § 302. The relevant subpart is § 302(a)(1), which covers defendants who "in person or through an agent . . . transact any business within the state or contract anywhere to supply goods or services in the state."
Gelber was served with the summons and complaint in Monaco.
Under the long-arm statute, plaintiffs are entitled to limited jurisdictional discovery to defeat a motion to dismiss based on alleged lack of personal jurisdiction, if plaintiffs have made "a sufficient start" toward showing their argument for jurisdiction "not to be frivolous." Peterson v. Spartan Indus., Inc., 33 NY2d 463, 467 (1974) (affirming order directing limited jurisdictional discovery in aid of deciding motion to dismiss).
The argument for personal jurisdiction made by plaintiff is that Gelber used Gasiunasen as his agent in Gasiunasen's negotiation and execution of the Contract, and the Contract chose New York as the forum for resolving future disputes arising under that Contract.
It is a well-known principle of agency law that a principal is liable for the conduct of an agent acting within the scope of his actual authority. Such authority can be directly granted, or it can be implied when verbal or other acts by a principal reasonably give the agent an appearance of authority to conduct the transaction. Greene v. Hellman, 51 NY2d 197, 204 (1980). But even if the agent has no actual authority, a principal may still be liable for the acts of an apparent agent, if verbal or other acts by the apparent agent have reasonably given the agent an appearance of authority to conduct the transaction, and a third party has relied upon that appearance of authority. Id.
Mathieu Ticolat, who owns Ticolat Fine Art, has affirmed in an affidavit that it is the established custom in the art business for buyers and sellers to work through dealers, and that dealers would consider it improper and unethical to go around a dealer and approach its principal directly. Van De Weghe has confirmed this custom in his affidavit, adding that art dealers usually keep the names of their principals confidential.
Van De Weghe has also averred that he did not know who the seller was when he came to Toronto to inspect the painting. During the inspection, Gelber's son was present, and Van De Weghe saw a letter addressed to Gelber on the kitchen counter of the apartment. He "inferred" that Gelber was the owner of the painting and made a record of the name. (Van de Weghe Aff. ¶ 11.)
Gelber has acknowledged in an affidavit that he expressed interest in selling the painting to Arij Gasiunasen, the principal of Gasiunasen, in early December 2006, and had several conversations with Arij about the sale between then and early February 2007. Gelber avers that he permitted Arij to arrange for a prospective buyer to view the painting at Gelber's son's apartment in Toronto. (Gelber Reply Aff. ¶¶ 13-14.) Gelber's son Derek and a representative of Gasiunasen were present for the inspection. (Gelber Reply Aff. ¶ 14.) Gelber admits that he agreed, in a phone call with Arij, to sell the painting to the buyer for 2 million if certain conditions were met. (Gelber Reply Aff. ¶¶ 16-19.) Gelber avers that Arij conveyed to him the buyer's acceptance of those conditions. (Gelber Reply Aff. ¶ 21.) In an affidavit sworn on July 25, 2007 in the Superior Court of Justice in Ontario, Canada, in the action of Van Damme v. Gelber,07-CV-335287PD1, Gelber averred that he has sold and purchased art to and from Arij "over a period of many years." (Gelber Canadian Aff. ¶ 9.)
Plaintiff has also submitted evidence that Gasiunasen sent the escrow agent Gelber's Monaco bank account information so that the funds could be wired to that account, in a January 31, 2007 email. (Stern Aff. Ex. 2.) The purchase price was set in euros, rather than dollars, which, plaintiff argues, suggests that the seller preferred euros. Gasiunasen wired the money to Gelber's Monaco bank account on February 5, 2007.
Based on these submissions, plaintiff has made a more than sufficient start at establishing a basis for personal jurisdiction over Gelber based on Gasiunasen's actual agency or apparent authority so as to warrant full discovery.
Gasiunasen's Motion to Dismiss
Gasiunasen moves to dismiss the complaint under CPLR §§ 3211(a)(1) and (7). The pertinent standard of review is well known. For purposes of this motion, I presume the allegations of the Complaint to be true and accord them "every favorable inference," except insofar as they "consist of bare legal conclusions" or are "inherently incredible or flatly contradicted by documentary evidence." Beattie v. Brown Wood, 243 AD2d 395, 395 (1st Dept. 1997); see also Rovello v. Orofino Realty Co., 40 NY2d 633, 635 (1976).
Gasiunasen's motion is granted as to the causes of action for conversion and specific performance; plaintiff has not alleged facts supporting a conclusion that Gasiunasen owned or controlled the painting. Plaintiff insists that Gasiunasen represented that it controlled the painting in a January 31 email, in which Arij told Stern, the escrow agent, that Gelber wanted Gasiunasen to be in "total charge of this transaction" and that Gasiunasen "will then release the artwork when payment is made in full." (Stern Aff. Ex. 3.) In the context of the whole email, plaintiff's reading of the email is not plausible; the email suggests only that Gasiunasen was acting as Gelber's agent in the transaction, not that Gasiunasen had ownership or control of the painting. Plaintiff has not cited to a single case in which a court has upheld a similar claim of conversion or specific performance against a defendant that was at most an agent and undisputedly not the owner of the property in question. Therefore, the claims of conversion and specific performance are dismissed as against Gasiunasen.
Gasiunasen makes two arguments in favor of dismissing the breach of contract claim.
First, Gasiunasen argues that the Contract as alleged is void for lack of mutuality of obligation, because it did not obligate plaintiff to buy the painting, and Ticolat's purchase was conditioned on performance by plaintiff.
It is a "not uncommon analytical error" to "search for mutuality', which is not always essential to a binding contract, rather than seeking to determine the presence of consideration, which is a fundamental requisite." Weiner v. McGraw-Hill, Inc., 57 NY2d 458, 464 (1982). "[M]utuality', in the sense of requiring . . . reciprocity, is not necessary when a promisor receives other valid consideration." Id. Valid consideration "consists of either a benefit to the promisor or a detriment to the promisee." Id.; see Hamer v. Sidway, 124 NY 538, 546 (1891) (consideration means that "something is promised, done, forborne or suffered by the party to whom the promise is made as consideration for the promise made to him"). "The issue of adequate consideration for a contract is generally a question of fact." Daniel Goldreyer, Ltd. v. Van de Wetering, 217 AD2d 434, 438 (1st Dept. 1995). "The value of the consideration is not crucial as long as it is acceptable to the parties, and the general rule is that the slightest consideration may sufficiently support the most onerous contractual obligation." Id. at 439.
Gasiunasen does not appear to argue that the Contract lacks consideration, but to the extent that it has made that argument, I conclude that plaintiff has adequately alleged that there was consideration on both sides of the Contract.
Gasiunasen cites Ying-Qi Yang v. Shew-Foo Chin for the proposition that a contract lacking mutuality of obligation is void. 42 AD3d 320 (1st Dept. 2007). In my view, Ying-Qi does not govern this case, and even if it did, it does not require the conclusion that the Contract is void. In Ying-Qi, a purchaser of real property granted the seller "an absolute and unconditional right of cancellation" of the contract, for whatever reason. The seller elected to cancel it, and the Court held it had a right to do so, under the unconditional contract termination clause. Id. at 320. None of the parties here are trying to enforce a contract termination clause, so Ying-Qi's holding does not apply.
Ying-Qi concludes by saying: "[e]ven if the contract were deemed illusory for lack of mutuality of obligation, that would render the contract as a whole void." It appears that this statement is a dictum, but even if it were a second holding, it would not require a conclusion that the Contract is void. The contract in Ying-Qi could be cancelled by one party for any reason, but not by the other party. This was not the case in the Contract as alleged here. In the Contract, Ticolat agreed to pay Gasiunasen the purchase price of 2 million plus a $100,000 commission for the painting. The parties to the Contract acknowledged that Ticolat's ability to perform depended on a condition outside its control "performance by [its] client, the ultimate purchaser." (Compl. Ex. 2.) Gasiunasen in its papers refers to Ticolat as plaintiff's agent and it is not for me to decide on this motion whether this characterization is accurate. According to the complaint, Ticolat was not the agent of plaintiff, the ultimate buyer, but an intermediary between Van de Weghe and Gasiunasen, which were agents for the buyer and seller, respectively. (Compl. ¶ 5.) As such, Ticolat could not guarantee plaintiff's performance, and so its purchase was expressly conditioned on plaintiff's performance.
Gasiunasen has not argued that a contract that conditions performance on a third party's act is void. Indeed, New York recognizes that "[t]he parties to a contract may condition performance on the act of a third person." Rochester Plumbing Supply Co. v. A. Burgart, Inc., 49 AD2d 78, 82 (4th Dept. 1975). So I do not agree with Gasiunasen that the Contract is void for lack of mutuality of obligation even were it required.
Second, Gasiunasen moves to dismiss the breach of contract claim because Gasiunasen cannot be liable as an agent for its principal's failure to perform. Gasiunasen argues, under the law applicable to fully disclosed principals, that the complaint fails to allege that Gasiunasen acted in its own name.
It is established law that an agent of a fully disclosed principal cannot be personally liable under a contract, unless the agent separately assumes individual liability. Salzman Sign Co. v. Beck, 10 NY2d 63, 67 (1961) (corporate officer as agent of disclosed principal had no personal liability under contract he signed, because "everyone in business knows that an individual . . . officer is not liable for his corporation's engagements unless he signs individually"); Cruz v. NYNEX Info. Resources, 263 AD2d 285, 291 (1st Dept. 2000) (affirming dismissal of claims against defendant who unquestionably "was merely the agent of a disclosed principal and, thus, had no personal liability under the contract"); Jacobs v. Facilities Dev. Corp., 500 NYS2d 195, 197 {118 AD2d 971} (3rd Dept. 1986) (it was against the weight of the evidence for trial court to find that defendant's status as an agent was undisclosed, where an employee of the principal had explained to plaintiffs' agent defendant's role as its agent in negotiating and signing leases); Sweeney v. Herman Mgmt., Inc., 85 AD2d 34, 37-38 (1st Dept. 1982) (vacating arbitration award as irrational, where it "overlooked the fact that defendant entered into the contract with petitioner as agent for a receiver, ignor[ed] defendant's limited agency status and lack of power to transfer any control over the premises," and "disregard[ed] the fact that [defendant] never had any power to enforce this agreement").
The facts of Mencher v. Weiss, 306 NY 1, 6 (1953), cited by plaintiff, are wholly inapposite, as nothing in the Contract appears to bind Gasiunasen individually, as opposed to binding him as an agent of the seller.
Based on the complaint and other submissions before me, however, it is not clear that this law applies. Plaintiff has not alleged that Gelber's identity was disclosed when the Contract was executed. In fact, plaintiff's submissions suggest the opposite: that Gelber's identity was only partially disclosed. The affidavits of Van de Weghe and Ticolat, submitted by plaintiff, state that the names of an art buyer and seller are generally kept confidential. Van de Weghe evidently did not know who the seller was when he inspected the painting at the Toronto apartment around January 24; rather, he "inferred" the seller's identity from an envelope lying on the kitchen counter. (Van de Weghe Aff. ¶ 11.) This was a suspicion that turned out to be correct, but the disclosure of a principal's identity cannot depend on another party's ability to draw inferences. The complaint does not allege whether or when Gelber's identity was disclosed. Gelber's name does not appear in the Contract. A January 31, 2007 email from Arij Gasiunasen to the escrow agent, Peter Stern, submitted by plaintiff, identifies Gelber as the owner of the Monaco bank account to whom the funds should be wired. (Stern Aff. Ex. 2.) But plaintiff has not alleged that this email was shared with him, and if so, whether it was shared with him before the Contract, which also bears a January 31 date, was executed.
Courts refer to a principal whose identity has not been disclosed, although the agency relationship is known, as "partially disclosed." New England Marine Contractors, Inc. v. Martin, 156 AD2d 804, 804 (3rd Dept. 1989). A different rule applies to the liability of an agent of a partially disclosed principal than to the liability of an agent of a fully disclosed principal. Generally, the agent for a partially disclosed principal "will be liable on any contracts that he makes on behalf of his principal," unless the parties to the contract "expressly and effectively agree that the agent will not be liable." Rafner v. Toplis Harding, Inc., 25 AD2d 826, 826 (1st Dept. 1966). Accord Cobb v. Knapp, 71 NY 348, 351 (1877) ("It is not sufficient that the seller may have the means of ascertaining the name of the principal. . . . He must have actual knowledge."). Tarolli Lumber Co. v. Andreassi, 59 AD2d 1011, 1012, 399 NYS2d 739 (4th Dept. 1977) ("the agent will be liable even if the third party is aware that an agency relationship exists, so long as the agent fails to disclose the principal's identity"); Weil v. Murray, 161 F. Supp.2d 250, 259 (S.D.NY 2001) ("An agent who enters into an agreement on behalf of [a] partially disclosed principal is jointly and severally liable with the principal."); Restatement (Third) of Agency § 6.02 ("When an agent acting with actual or apparent authority makes a contract on behalf of an unidentified principal, (1) the principal and the third party are parties to the contract; and (2) the agent is a party to the contract unless the agent and the third party agree otherwise.").
But cf. Restatement (Third) of Agency § 6.02, Illustration 2 (prior to contracting with agent to sell antique clock, if buyer learns from a friend that the agent represents the principal, the agent is not liable under the contract of sale unless the contracting parties agree otherwise).
Gasiunasen has not made any argument for why the complaint should be dismissed under the law applicable to an agent of a partially disclosed principal; it has only argued for dismissal based on the law applicable to the agent of a fully disclosed principal. Viewing the submissions in plaintiff's favor, as I must on this motion to dismiss, it is not clear that this law applies. Therefore, I cannot conclude that plaintiff has not stated a claim for breach of contract against Gasiunasen without permitting further discovery.
Accordingly, it is:
ORDERED that Gasiunasen's motion to dismiss (Motion Seq. No. 001) is granted as to the first and second causes of action and otherwise denied; and it is further
ORDERED that Gelber's motion to dismiss (Motion Seq. No. 002) is denied; and it is further
ORDERED that defendants shall serve answers to the complaint within 10 days after service of a copy of this Order with notice of entry; and it is further
ORDERED that the parties shall appear for a preliminary conference on February 26, 2008 at 9:30 a.m. and are directed meanwhile to proceed with full discovery.