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MORGOLD, INC. v. KEELER

April 27, 1995

MORGOLD, INC., a New York Corporation, Plaintiff,
v.
FRED E. KEELER, et al., Defendants.



The opinion of the court was delivered by: CHARLES A. LEGGE

 This case requires the court to resolve the ownership of a work of art. The word "provenance" has developed in the art world as a term for the subject of title to works of art. The case was tried to the court, sitting without a jury, and was briefed, argued, and submitted for decision.

 The court heard the testimony of the witnesses and has reviewed the relevant portions of the transcripts of their testimony. The court has reviewed the exhibits which were admitted into evidence, *fn1" the record of the case, the briefs and arguments of counsel, and the applicable authorities.

 This opinion constitutes the findings of fact and conclusions of law of this court, as provided in Rule 50(a) of the Federal Rules of Civil Procedure. The facts stated in this opinion are found to be facts, by a measure of a preponderance of the evidence.

 I.

 The work of art in dispute is an oil on canvas painting, 25-1/4" x 52" by Alfred T. Bricher, entitled "Marlton's Cove, Grand Manan, Maine." Bricher was an American painter of the so-called Hudson River School, and he signed this painting in the lower left hand corner with his monogram. A description or picture of the painting appears in numerous catalogs. The authenticity of the painting is not in issue. Instead, the issue is who owns it.

 The painting is presently possessed by defendant Fred E. Keeler. Plaintiff Morgold, Inc. has filed this action seeking possession of the painting, and a judicial determination that plaintiff is the owner. Keeler denies plaintiff's claims and has counter-claimed for a declaration that he is entitled to the possession and the title to the painting.

 II.

 For purposes of this case, the relevant facts begin in 1987, when the painting was owned by the R. H. Love Gallery. Neither of the parties raises any question about the title to the painting prior to that date, or any question about its ownership by that gallery.

 In October 1987, the Love gallery sold the painting to Altman Fine Arts, a New York art dealer, and to Andre Lopoukhine, a Boston art dealer. Each of those dealers contributed 50% of its purchase price and each acquired a one-half interest in the painting. The purchase is reflected in a written agreement dated October 1987, which states that Altman and Lopoukhine "have agreed to each purchase a half share."

 The trial exhibits then reflect a January 13, 1989 bill of sale, allegedly transferring Altman's one-half interest in the painting to plaintiff Morgold. Defendant questions the authenticity of that bill of sale, and the evidence does raise questions about the genuineness of that alleged documentation. However, for purposes of this case, the court need not resolve that dispute. The dispute here is really what happened after Morgold allegedly acquired its interest. This case can be resolved on the assumption, which the court makes, that Morgold acquired Altman's one-half interest in the painting.

 Therefore, at that stage in the chain of title, this court will assume that Morgold and Lopoukhine each owned a one-half interest.

 In July 1989 Lopoukhine consigned possession of the painting to the Vose Gallery in Boston. Gary Goldinger, Morgold's sole shareholder and officer, later attempted to obtain possession of the painting from the Vose Gallery. But Vose refused to give possession to Goldinger until Vose received appropriate written instructions from both Morgold and Lopoukhine.

 Morgold then wrote to the Vose Gallery and told Vose that Morgold and Lopoukhine, the "co-owners of the [painting] have come to an agreement" concerning it. The letter instructed the Vose Gallery to release possession of the painting to Lopoukhine.

 It is at this point that the disputed events giving rise to this litigation began. Later in 1990 Lopoukhine purported to sell the painting to Mr. Mark Grossman, a Scottsdale, Arizona businessman who is not in the art business, in exchange for the forgiveness of a debt which Lopoukhine apparently owed to Grossman. That sale by Lopoukhine allegedly breached the April 1990 agreement between Morgold and Lopoukhine in two respects. First, Lopoukhine sold the painting for less than the agreed upon price specified in the agreement. Second, Lopoukhine did not pay Morgold 50% of the benefits which Lopoukhine received from the sale (that is, the forgiveness of the indebtedness owed by Lopoukhine to Grossman).

 In this case, plaintiff contends that because Lopoukhine's transaction with Grossman breached the terms of Lopoukhine's agreement with Morgold, Lopoukhine did not have the legal authority to pass title to the painting to Grossman; and hence there was no valid chain of ownership which subsequently resulted in Keeler's acquisition of the painting. Plaintiff also sued Lopoukhine in New York state court for breach of their agreement and for converting the painting. That suit is not material to this case, except for its evidentiary value in evaluating the claims of plaintiff here. In plaintiff's suit against Lopoukhine, plaintiff did not claim that the title to the painting was vested solely in plaintiff, but instead plaintiff sued Lopoukhine for breach of their agreement "concerning the right, title and ownership interest in and to" the painting. Lopoukhine later filed for bankruptcy protection, and plaintiff continued its suit as an adversary proceeding in Lopoukhine's bankruptcy. That action was ultimately settled and dismissed. *fn2"

 To return to the chain of title with which we are concerned here: In 1990, Grossman had possession of the painting and the purported interest in it that he had acquired from Lopoukhine. Around April 1991 Grossman contacted David Adler, a Scottsdale, Arizona antique dealer. Adler was not an art dealer, although he purchased and sold paintings as a part of his antique business. Grossman asked Adler if he knew anyone who might be interested in purchasing the painting. Grossman initially asked a high price for the painting, which discouraged any interest by Adler at that time. But by mid June 1991, Grossman offered to sell the painting, either to or through Adler, for about one-half or one-third of Grossman's original asking price.

 At approximately that time, Adler contacted defendant Keeler about the painting. Adler and Keeler had done business with one another for several years, including transactions involving art. And Adler knew that Keeler was interested in and knowledgeable about early American artists such as Bricher. When Adler first contacted Keeler ...


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