Kohler v. Leslie Hindman, Inc.

• Decision Date: 05 April 1996
• Docket Number: No. 95-1752,95-1752
• Citation: 80 F.3d 1181
• Parties: Peter G. KOHLER and Walter J. Kohler, Plaintiffs-Appellants, v. LESLIE HINDMAN, INC., an Illinois corporation, and Richard M. Thune, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1181

80 F.3d 1181

34 Fed.R.Serv.3d 1342

Peter G. KOHLER and Walter J. Kohler, Plaintiffs-Appellants, v. LESLIE HINDMAN, INC., an Illinois corporation, and Richard M. Thune, Defendants-Appellees.

No. 95-1752.

United States Court of Appeals Seventh Circuit.

Argued Sept. 20, 1995.

Decided April 5, 1996.

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 93 C 6170--Charles P. Kocoras, Judge.

Charles F. Marino, David M. Marino (argued), Chicago, IL, for Peter G. Kohler, Walter J. Kohler.

Donald C. Battaglia (argued), Wildman, Harrold, Allen & Dixon, Chicago, IL, for Leslie Hindman.

Eugene E. Gozdecki, David S. Americus (argued), Richard A. DelGiudice, Gozdecki & DelGiudice, Chicago, IL, for Richard M. Thune.

Before CUDAHY, EASTERBROOK, and RIPPLE, Circuit Judges.

CUDAHY, Circuit Judge.

An artist once produced a painting now called "The Plains of Meudon." For a while, the parties in this case thought that the artist was Theodore Rousseau, a prominent member of the Barbizon school, and that the painting was quite valuable. With this idea in mind, the Kohlers consigned the painting to Leslie Hindman, Inc., an auction house, and Richard Thune bought it at auction for $90,000 on the condition that it was, in fact, a Rousseau. It was not. The parties then pursued a lawsuit in the district court to determine who would get stuck with it. Upon a motion for summary judgment, the district court held that, as a matter of law, the contracts between the parties required that the Kohlers keep the painting. The Kohlers contend that the district court erred in its interpretation of the contracts, and they appeal. We affirm.

Background

The Kohlers inherited the painting from their mother, Dorothy Dings Kohler, in 1989. Two years later, they decided to sell it along with some other artwork from their mother's estate, and they contacted Leslie Hindman Auctioneers (Hindman, Inc.). After arranging for the inspection of the artwork, Leslie Hindman, president of her eponymous auction house, met with the Kohlers and discussed the terms by which her company would sell it at auction. Hindman, Inc. and the Kohlers then entered into a consignment agreement which made the company the Kohlers' agent for the auction sale.

Among other things, the consignment agreement defined the scope of Hindman, Inc.'s authority as agent. Two aspects of that authority concern us here. First, Hindman, Inc. was obliged to sell the painting according to the conditions of sale spelled out in the auction catalog. Those conditions provided that neither the consignors nor Hindman, Inc. made any warranties of authenticity. Indeed, the conditions emphasized that "[a]ll lots are sold 'AS IS,' " and one provision of the conditions asserted that "[n]o statement anywhere, whether oral or written, shall be deemed" to be a warranty of authenticity. The conditions also provided that Hindman, Inc. would insure that title to all lots passed with the fall of the auctioneer's hammer. In addition to these prescriptions, another provision of the consignment agreement gave the company extensive and exclusive discretionary authority to cancel sales. In Paragraph 14 of the consignment agreement, Hindman, Inc. declared that

We are authorized as your agent to accept the return and rescind the sale of any [p]roperty if we at any time in our sole discretion determine that the offering for sale of any [p]roperty has subjected us and/or you to any liability under a warranty of authenticity.

Along with the other artwork from the Dorothy Dings Kohler estate, Hindman, Inc. listed the painting in its auction catalog, noting that the painting was, in its best judgment, by Rousseau. Hindman, Inc. also displayed the painting at a pre-auction showing where Thune's agent, Simon Parkes, saw it and developed some doubts about its authenticity. He expressed those doubts to his principal and to Scot Campbell, an employee of Hindman, Inc. Campbell relayed Parkes' suspicions to Ms. Hindman, who was soon in touch with Thune. Thune was still interested in the painting, but he wanted to have it authenticated before committing to its purchase. Unable to obtain an authoritative opinion about its authenticity before the auction, Ms. Hindman and Thune made a verbal agreement that Thune could return the painting within approximately thirty days of the auction if he was the successful bidder and if an expert then determined that Rousseau had not painted it. Neither Ms. Hindman nor anyone else at Hindman, Inc. told the Kohlers about the questions concerning the painting or about the side agreement between Thune and Hindman, Inc.

At the auction on October 13, 1991, Thune prevailed in the bidding with a high bid of $90,000, and he took possession of the painting without paying. He then sent it to an expert in Paris who decided that it was not a Rousseau. Thune returned the painting to Hindman, Inc. in March 1992.

The Kohlers sued both Hindman, Inc. and Thune. They claimed that Hindman, Inc. had breached the consignment agreement with them and its fiduciary duty to them and had committed constructive fraud and conversion. They also claimed that they had a implied contract with Thune himself for the painting, and that Thune had breached that contract by failing to pay the $90,000. Hindman, Inc. and Thune each made various claims of their own.

After the district court dismissed the conversion claim, the parties made cross-motions for summary judgment on all of the remaining claims. The district court ruled that Hindman, Inc. and Thune were entitled to judgment on all of the Kohlers' claims against them. The Kohlers appeal that ruling.

Discussion

We review a district court's summary judgment rulings de novo, applying the same standards as the district court. Illinois Conf. of Teamsters and Employers Welfare Fund v. Steve Gilbert Trucking, 71 F.3d 1361, 1364 (7th Cir.1995). A district court should grant a party's motion for summary judgment when the record shows that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).

The parties here do not dispute the relevant facts; therefore our review focuses on the district court's application of the law to those facts. Because this is an action within the district court's diversity jurisdiction, Illinois' choice of law rules determine the applicable substantive law. Klaxon Co v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). In disputes such as this one that arise from a contract, Illinois law respects the contract's choice-of-law clause as long as the contract is valid. Vencor, Inc. v. Webb, 33 F.3d 840, 844 (7th Cir.1994). The Kohlers and Hindman, Inc. do not dispute the validity of their consignment agreement, and that agreement provides that their disputes should be governed by Illinois law. Therefore, all of the Kohlers' claims against Hindman, Inc. must be resolved in accordance with Illinois law, as will the Kohlers' claim against Thune since it ultimately depends upon the interpretation of their contract with Hindman, Inc.

Indeed, all of the Kohlers' claims depend upon how the consignment agreement defined the scope of Hindman, Inc.'s authority as the Kohlers' agent. If Hindman, Inc. acted at all times within its authority, the Kohlers cannot prevail on any of their claims. Defining the scope of that authority requires an interpretation of the consignment agreement.

As a preliminary matter, however, the Kohlers argue that we do not need to interpret the contract at all because Hindman, Inc. has judicially admitted its liability for breach of contract. They contend that the district court erred in excluding this admission, which they regard as dispositive, from the summary judgment record.

The putative judicial admission is a statement that Leslie Hindman made during her deposition in a lawsuit brought by a different plaintiff in Illinois state court. At the deposition, Ms. Hindman was asked a series of questions about Thune's return of the painting, and, in response to one, she asserted that "Mr. Kohler knows that per our conditions of sale he, by right, should be paid."

This certainly is an admission, but it is not a judicial admission. When a party in a lawsuit makes an admission in its pleadings or in its answer to a request for admissions, it makes a judicial admission that can determine the outcome of that lawsuit. Fed.R.Civ.P. 36(b); Murrey v. United States, 73 F.3d 1448, 1455 (7th Cir.1996). But a statement made in one lawsuit cannot be a judicial admission in another. See id. It can be evidence in the other lawsuit, but no more. See id. Ms. Hindman's statement in her state court suit is not even competent evidence in this case because it states a legal conclusion and is not the admission of a fact that could be dispositive.

Of course, the Kohlers have other arguments. They proffer an interpretation of the consignment agreement that would put Hindman, Inc. in breach. They contend that the agreement made Hindman, Inc. powerless to do anything other than sell the painting "as is." They point out that the consignment agreement bound Hindman, Inc. to the terms of the auction catalog's conditions of sale, and those conditions informed prospective buyers that Hindman, Inc. sold every item "as is" and absolutely disclaimed all warranties of authenticity. The conditions also provided that high bidders would take title at the fall of the hammer. The Kohlers argue that the combination of these provisions clearly make the dealings of Hindman, Inc. with Thune unauthorized. The pre-auction side agreement with Thune was equivalent to a warranty of authenticity, which Hindman, Inc. promised not to make; and the rescission effected after the sale violated Hindman, Inc.'s duty to make the title to the painting pass with the fall of the hammer. The Kohlers acknowledge that ...