Balog v. Center Art Gallery-Hawaii, Inc.
| Decision Date | 21 August 1990 |
| Docket Number | Civ. No. 89-00033 ACK. |
| Parties | Edward M. BALOG and Helen L. Balog, Plaintiffs, v. CENTER ART GALLERY-HAWAII, INC. dba Center Art Gallery, William D. Mett, Marvin L. Wiseman and Lloyd Wright, Defendants. |
| Court | U.S. District Court — District of Hawaii |
COPYRIGHT MATERIAL OMITTED
Jeffrey S. Portnoy, Patricia J. McHenry, Cades Schutte Fleming & Wright, Honolulu, Hawaii, for plaintiffs.
Peter C. Wolff, Jr., Hart & Wolff, Honolulu, Hawaii, for defendants.
ORDER DENYING DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS
This matter came before the court on a motion brought by the defendants in this action for a judgment based on the pleadings alone. The defendants contend that an application of the U.C.C.'s statute of limitations bars the plaintiffs' action and that this court should therefore dismiss the case. This court finds the application of the statute urged by the defendants to be inappropriate and accordingly with this order denies the defendants' motion.
The plaintiffs in this action are residents of the State of Washington. The defendants are all residents of the State of Hawaii.1 In November of 1978, while the plaintiffs were tourists in Hawaii, they visited one of the defendants' art galleries. Center Art offered the plaintiffs a number of works of art, and over the course of time solicited the plaintiffs via telephone calls and through the mail to purchase various pieces of artwork, all purportedly produced by Salvidor Dali.
Beginning in 1978, the plaintiffs purchased a number of pieces over a period of four years, all of which were purportedly produced by Dali.2 These were represented by Center Art to be of equal or greater worth than the purchase price; the plaintiffs paid a total of $36,200 for the artwork.
After the sale, Center Art continued to mail to the plaintiffs a "Confidential Appraisal —Certificate of Authenticity" for each of the artworks they had purchased. They received such mailings in 1979, 1980, 1981, 1982 and in 1987. In each of these mailings, the defendants continued to maintain that the artworks were produced by Dali either as exclusive originals or as limited editions; furthermore, they represented to the plaintiffs that the artwork had appreciated in value above the price originally paid for it, setting forth the increased value for each piece in each mailing. The plaintiffs, who were private collectors but who claim to have no special expertise regarding the authenticity of the artwork in their collection, relied on the representations of the defendants including the "Certificates of Authenticity" which the defendants repeatedly sent to them. In 1988, the Balogs first became aware of newspaper articles and television reports which indicated that representations made by the defendants relative to artwork sold through their gallery might be false. According to the plaintiffs, they had been unaware of the existence of allegations of such conduct which were made against the defendants as early as 1980 and reported in the local press.3 The plaintiffs investigated these allegations and ultimately filed their complaint in this action on January 13, 1989.
The defendants have moved for a dismissal of the case on the grounds that the complaint was not filed within the applicable statute of limitations which they maintain is 4 years from the time the cause of action accrued under H.R.S. § 490:2-725(1); UCC Art. 2-725(1). Since the artwork was all sold to them by 1981 and the plaintiffs did not file their action until 1989, almost 7½ years later, the defendants contend that no cause of action may be maintained. The plaintiffs response is that the statutes of limitation for the causes of action alleged in the complaint are all tolled by the defendants' continued action which the plaintiffs contend amounted to fraudulent concealment. The plaintiffs argue that they are thereby relieved from any statute of limitations until the time that they knew or should have known about the causes of action.
As set forth above, this case deals with allegedly counterfeit artwork which was sold to the plaintiffs based on the defendants' representations that it was genuine. The plaintiffs have claimed that, among other things, they have a cause of action for breach of an express warranty under the Uniform Commerical Code since by selling them fake artwork, the defendants breached the express warranties which are outlined in the Code; they claim that the defendants are therefore liable for the damage caused the plaintiffs through the defendants' sale of non-conforming goods. The defendants contend that no warranties were made explicitly and that the plaintiffs had an obligation to discover the non-conformity and bring any claim based on the allegations of forgery long before now. As the claims of counterfeiting and the various methods of detection and discovery of forgery are so intermingled with the legal arguments made by the parties, this court will first review the factual background which attends such claims.
This court has looked at various methods of counterfeiting art as a means of providing a background against which the application of the Uniform Commercial Code can be assessed. In order to assess the appropriateness and effectiveness of Article 2 as a means of affording buyers protection against fraud and misrepresentation by dealers, auction-houses and even artists themselves, it is necessary to provide a brief overview of the basic problems involved in art counterfeiting and its detection.4
The last two decades have seen a sky-rocketing market in the art world. Sales prices in the tens of millions of dollars for single works of art, once staggering, no longer cause much more than a ripple among those familiar with the market.5 These types of sales figures have presented both forgers and unscrupulous dealers with unprecedented opportunities for swindling the art-buying public. It has been estimated that transactions involving forgeries may comprise up to ten percent of the total art sales made annually.6
While this is a civil case, the defendants have already been criminally convicted of mail and wire fraud for conduct similar to that alleged by the plaintiffs. United States v. Center Art Gallery, Inc. dba Center Art Gallery, William D. Mett, Marvin Wiseman, CR. No. 89-00125 HMF, Judgment entered on May 4, 1990. Notwithstanding the convictions which have occurred in this case, in many other instances, the criminal law has often proven an ineffective weapon in pursuing forgers and counterfeiters.7 Furthermore, the problem of increased incentives for forgery and counterfeiting is often compounded by the fact that forgery victims are reluctant to cooperate with prosecutors in going after forgers and counterfeiters. Defrauded dealers may fear loss of reputation and prefer silence to the risk of lost business; purchasers often fear public embarrassment at having been made a dupe. Additionally, there is the incentive to preserve the value of the counterfeit item for resale or tax purposes, even at the cost of abetting a known forger.8
There are numerous ways in which an artwork can be counterfeited. The court reviews them briefly simply to provide a background against which the defendants' arguments may be assessed.
This method consists of adding a recognized artist's signature to a painting or other work not executed by that artist. A signature is widely considered a valuable indicator of originality, but due to the fact that the number of unsigned paintings, especially those of classical periods, exceeds the number of signed ones, this practice is especially popular. When a signature is fixed with varnish it grows to looks more authentic with the passage of time.
More complicated than adding a signature is for the counterfeiter to complete an unfinished or discarded canvas of the original artist. Many such canvases are currently available in the market, and are particularly attractive as mediums of forgery due to the fact that the canvas itself possesses the correct age of the period, and the older, authentic portions of the work may belie the forger's additions.
A dealer or collector may sell a painting done by a member of a master's school, or a painting of the "period" during which a significant artist painted as if it were a work by the artist himself. It is not uncommon for students of a particular artist to have been so influenced by their master's technique that simple alterations and touch-ups are sufficient to disguise a work and render it a plausible product of the hand of the artist himself.
Using this method, the counterfeiter creates a copy of the specific piece and then sells it as a genuine original. The practice is not uncommon as a means of teaching students and improving their own technique. Hence copies have been made of significant pieces of art of every period; although many are produced for the pleasure or training of the copyist, others are created to be passed off as genuine originals.
This is a complex form of fabrication whereby the forger excises a number of details of various different paintings of the same artist and then reassembles them into a new work. In order to be successful, the counterfeiter must be so intimate with the technique of the master as to enable him to select those details which may be refabricated into a pastiche that closely resembles the master's style. When done effectively, such counterfeits are extremely difficult to detect.
Drawings are faked frequently — unfinished sketches, outlines and working sketches of works which were completed later. Because drawings contain fewer details than the...
To continue reading
Request your trial
-
Martin Hilti Family Trust v. Knoedler Gallery, LLC
...or reasonably should have been discovered.' " (Pltf. Br. (White Dkt. No. 78) at 18–19 (quoting Balog v. Center Art Gallery–Hawaii, Inc., 745 F.Supp. 1556, 1572 (D.Hawai'i 1990))).Defendants argue that the application of Hawaiian law is improper here, because—under the "center of gravity" te......
-
Schmidt v. HSC, Inc., SCWC–29454.
...court cases, Rundgren v. Bank of New York Mellon, 777 F.Supp.2d 1224 (D.Haw.2011) (Seabright, J.) and Balog v. Center Art Gallery–Hawai‘i, 745 F.Supp. 1556, 1572–73 (D.Haw.1990) (Ezra, J.), that applied the doctrine of fraudulent concealment in non-UFTA cases. According to Petitioners, HRS ......
-
Hope v. Klabal
...Hope purchased was not so low that getting a second opinion would have been financially prohibitive. Cf. Balog v. Center Art Gallery-Hawaii, Inc., 745 F.Supp. 1556 (D.Haw.1990) (discovery rule applied where the sellers' actions and the low price of the artwork effectively precluded the buye......
-
Western Recreational Vehicles, Inc. v. Swift Adhesives, Inc., a Div. of Reichhold Chemicals, Inc.
...Although not cited by the district court, several other courts have also applied Sec. 2-725 loosely. See Balog v. Center Art Gallery-Hawaii, Inc., 745 F.Supp. 1556, 1570 (D.Haw.1990) (representation that a painting is "authentic" is an explicit warranty of future performance) (expressly dis......