standards of fair dealing in the trade." Commercial Code Section 2103(1)(b).
Keeler is a good faith purchaser for value if (1) his own inquiry into the painting met reasonable commercial standards in the art trade, or (2) Adler, the person from whom Keeler purchased, was a good faith purchaser for value. Adler is not a commercial art dealer and was therefore not required to conform to the standards of a merchant in that industry. However, because of the facts of this case, the court need not resolve the distinction between the actions of Keeler and Adler.
There are two reported decisions in New York interpreting the requirement of good faith in art transactions. Porter v. Wertz, 68 A.D.2d 141, 416 N.Y.S.2d 254, (NY App. Div. 1979); Cantor, supra. Neither of those cases is factually helpful here. But they both emphasize that a dealer in art must take reasonable steps to inquire into the title to a painting, particularly if there are warnings that something is wrong with a transaction. Porter, 416 N.Y.S.2d at 257-58; Cantor, 639 F. Supp. at 367-68. That requirement was also discussed by the expert witnesses in this trial. For the reasons stated below, the court finds that no warnings were apparent to either Adler or Keeler and that both conducted themselves in a manner reasonable in the art industry.
Adler was acquainted with Grossman prior to the sale of this painting. He was aware that Grossman was a successful businessman, who owned a local restaurant chain. Adler had purchased four small paintings from Grossman prior to this transaction, and there had been no problems. He learned that this painting had been purchased by Grossman from someone in Boston, in exchange for the forgiveness of a debt. He did his own research regarding the painting's value, by reviewing publications of Christie's, Sotheby's and Butterfield & Butterfield, to look for reported auction sales of comparable Bricher paintings.
Adler and Keeler knew each other and had engaged in prior transactions in paintings. Keeler was advised by Adler about what Adler knew of the history of this painting. Keeler inspected a photograph of the painting and, as a dealer knowledgeable about American art, formed his own opinion about a reasonable price. He also called the Vose Gallery, and the Vose representative told him that the painting had been there for a year or more but had not sold. And the Vose representative did not indicate to Keeler that there was any dispute or irregularity with respect to the title. Although not communicated to Keeler, the information which Vose then had was the 1990 letter from Morgold indicating that there were no title disputes. Keeler also called Mr. Brown, an expert on Bricher paintings. Brown gave Keeler his opinion on the painting and some information about its prior history. Brown did not indicate that there were any disputes with respect to title.
The expert witnesses supported the conclusion that Keeler, and for that matter Adler, acted in conformity with acceptable commercial standards in the art industry. They confirmed that the steps taken by Keeler were adequate in the absence of other warning signals. They also confirmed that it is not the practice in the art industry, in the absence of warnings, for a buyer to require a seller to make disclosures about the chain of title or the prices paid at every link in the chain.
Plaintiff argues that there were two warnings which required Keeler to do more. One is the fact that Grossman acknowledged that he had obtained the painting in exchange for a debt forgiveness. The second was Grossman's reduction of his asking price, which was quite dramatic, over a period of several months. However, there was no evidence that acquiring an art object in exchange for debt forgiveness is unusual in the art industry. In fact, the evidence indicated that persons who buy and sell art with one another frequently have debits and credits that are offset in a subsequent purchase or sale transaction. And the drop in Grossman's asking price was not necessarily a warning signal. Adler and Keeler researched the price. It is clear that Grossman's original asking price was far above the then reasonable price for such a Bricher painting, and that the ultimate sales price was within a reasonable price range for such a painting.
The two New York cases cited by plaintiff, Porter v. Wertz and Cantor v. Anderson, supra, do support Morgold's legal position; that is, an art dealer cannot obtain good title unless he takes reasonable steps to investigate title when there are warning signs. However, those cases do not help Morgold beyond that point. That is because the questions of whether there were warning signs, and what degree of investigation was reasonable, are factual inquiries in each case.
This court finds and concludes, based upon the record of this trial, that both Adler and Keeler responded to the available information reasonably. There were no warnings which required them to do further investigation. Specifically, the court finds and concludes that Keeler satisfied the reasonable commercial standards in the art industry, acted honestly in connection with the transaction, and is a good faith purchaser for value.
The court therefore concludes that Keeler has the title and right to possess the painting. Morgold has no right, title or interest in the painting, in spite of Lopoukhine's breach of his agreement with Morgold. Judgment should be entered in favor of defendant and counterclaimant, and against plaintiff and counterdefendant.
IT IS SO ORDERED.
Dated: April 27, 1995.
CHARLES A. LEGGE
United States District Judge