Solomon R. Guggenheim Foundation v. Lubell

• Decision Date: 25 January 1990
• Citation: 550 N.Y.S.2d 618,153 A.D.2d 143
• Parties: The SOLOMON R. GUGGENHEIM FOUNDATION, Plaintiff-Appellant, v. Mrs. Jules LUBELL, Defendant-Respondent and Third-Party Plaintiff, v. Andre ELKON, N. Richard Miller and Jack D. Anfang, as Executors of the Estate of Robert Elkon, Deceased, Third-Party Defendants and Fourth-Party Plaintiffs, v. Gertrude STEIN, doing business as The Gertrude Stein Gallery, Fourth-Party Defendant.
• Court: New York Supreme Court — Appellate Division

Page 618

550 N.Y.S.2d 618

153 A.D.2d 143

The SOLOMON R. GUGGENHEIM FOUNDATION, Plaintiff-Appellant, v. Mrs. Jules LUBELL, Defendant-Respondent and Third-Party Plaintiff, v. Andre ELKON, N. Richard Miller and Jack D. Anfang, as Executors of the Estate of Robert Elkon, Deceased, Third-Party Defendants and Fourth-Party Plaintiffs, v. Gertrude STEIN, doing business as The Gertrude Stein

Gallery, Fourth-Party Defendant.

Supreme Court, Appellate Division First Department.

Jan. 25, 1990.

Jeffrey Barist, of counsel (F. Ellen Zeifer and Helena M. Tavares, with him on the brief, White & Case, attorneys), for plaintiff-appellant.

Gary B. Freidman, of counsel (Norman A. Senior with him on the brief, Greenfield Eisenberg Stein & Senior and Harry Torczyner, attorneys), for defendant-respondent and third-party plaintiff.

Before SULLIVAN, J.P., and CARRO, MILONAS, ELLERIN and WALLACH, JJ.

WALLACH, Justice.

The action is one to recover a chattel pursuant to CPLR article 71, often referred to as "replevin" (see, Siegel, New York Practice, § 337, at 411). It is brought by a museum and involves a watercolor painting, or gouache, claimed to be worth $200,000, and done by Marc Chagall in 1912 as a study for his oil painting of the same subject entitled Le Marchand de Bestiaux (The Cattle Dealer ). The complaint alleges that the gouache was stolen from plaintiff in the mid-1960's by a person or persons unknown; that plaintiff learned of defendant's possession of the gouache in August 1985; that on January 9, 1986 plaintiff made a demand on defendant to return the gouache; and that defendant refused. Defendant's answer alleges that she and her late husband purchased the gouache in May 1967 from a reputable Manhattan gallery for $17,000 without knowledge of any defects in the gallery's title, and raises as affirmative defenses the three-year statute of limitations applicable to actions to recover a chattel (CPLR 214[3], laches, adverse possession, and her status as a good faith purchaser for value. A motion by defendant for summary judgment based, inter alia, on the statute of limitations was granted on the ground that plaintiff's efforts to locate the gouache were not reasonably diligent in that no report of its loss was made to "the agencies which are routinely contacted when a work of art is stolen", such as the police, F.B.I., Interpol, and the Art Dealers Association, the latter of which maintains a registry of stolen art. Additional steps that plaintiff could have taken when it realized that the gouache was lost were suggested by defendant in support of her motion, including publicizing the loss in art publications and newspapers, hiring private investigators, promptly filing an insurance claim, and, most especially, notifying Chagall and the cataloguer of his works, Franz Meyer, both of whom were contacted by defendant's husband when he and defendant purchased the gouache. Plaintiff acknowledges that when it realized that the gouache was missing, the search it undertook did not extend beyond its own premises, but asserts that its decision not to report the loss to the authorities, publicize it in the art world, or actively investigate was a deliberate one, made in the belief, not uncommon in the 1960's and 1970's, that to do so would not help locate the gouache and might even hinder its recovery by driving it further underground. We hold that whether plaintiff was obligated to do more than it did in searching for the gouache depends on whether it was unreasonable not to do more, and whether it was unreasonable not to do more is an issue of fact relevant to the defense of laches and not the statute of limitations. The action, therefore, should not have been dismissed as barred by the statute of limitations.

IAS relied on DeWeerth v. Baldinger, 836 F.2d 103 [2nd Cir.] cert. denied, 486 U.S. 1056, 108 S.Ct. 2823, 100 L.Ed.2d 924, a recent Second Circuit case which dismissed as time-barred a replevin action to recover a stolen painting from a good-faith purchaser on the ground that the plaintiff therein did not use "due diligence" in attempting to locate the painting. Noting the "absence of controlling State authority" as to whether New York law obligates one to search for one's stolen property, and purporting to "make an estimate" of how the New York Court of Appeals would rule on that question, DeWeerth predicts that that court "would impose a duty of reasonable diligence in attempting to locate stolen property, in addition to the undisputed duty to make a demand for return within a reasonable time after the current possessor is identified." (at 107, 108). The basis for this prediction is that the law would otherwise anomalously favor a thief over a good-faith purchaser by affording the owner of stolen property more time to sue the latter than the former. As DeWeerth explains, "[i]n virtually every state except New York, an action for conversion [and presumably replevin] accrues when a good-faith purchaser acquires stolen property", an accrual rule which "creates an incentive to find one's stolen property." (at p. 109). In New York, however, the pertinent accrual rules create such an incentive only when it is from the thief himself that stolen property is sought to be recovered. As against a thief, a cause of action for replevin accrues, and the limitations period therefore begins to run, immediately upon the occurrence of the theft (at p. 106, citing Sporn v. M.C.A. Records, Inc., 58 N.Y.2d 482, 487-88, 462 N.Y.S.2d 413, 448 N.E.2d 1324), and this is so even if the owner does not know that a theft has occurred (at p. 106, citing Varga v. Credit-Suisse, 5 A.D.2d 289, 291-92, 171 N.Y.S.2d 674 [1st Dept.], aff'd, 5 N.Y.2d 865, 182 N.Y.S.2d 17, 155 N.E.2d 865, and Two Clinton Square Corp. v. Friedler, 91 A.D.2d 1193, 1194, 459 N.Y.S.2d 179 [4th Dept.]. As against a good faith purchaser, however, accrual is deferred, and the statute therefore does not begin to run, until a demand for return of the property has first been made and refused (at p. 106, citing Menzel v. List, 22 A.D.2d 647, 253 N.Y.S.2d 43 [1st Dept.], on remand, 49 Misc.2d 300, 267 N.Y.S.2d 804,modified as to damages, 28 A.D.2d 516, 279 N.Y.S.2d 608, reversed as to modification, 24 N.Y.2d 91, 298 N.Y.S.2d 979, 246 N.E.2d 742), this because a good-faith purchaser of stolen property commits no wrong, as a matter of substantive law, until he has first been advised of the plaintiff's claim to possession and given an opportunity to return the chattel (at pp. 106, 108, citing Gillet v. Roberts, 57 N.Y. 28). Thus, the requirement that a demand be made upon a good faith purchaser (or indeed anyone else whose possession is not tortious) is a substantive element of the cause of action, not a procedural condition precedent to suit, and, for that reason, CPLR 206(a), which provides that "where a demand is necessary to entitle a person to commence an action, the time within which the action must be commenced shall be computed from the time when the right to make the demand is complete", is inapplicable (at p. 107, citing Frigi-Griffin, Inc. v. Leeds, 52 A.D.2d 805, 806, 383 N.Y.S.2d 339 [1st Dept.]; see also, 1 Weinstein, Korn and Miller, New York Civil Practice, par. 206.01). In other words, absent a demand there is no cause of action for replevin against a good-faith purchaser, and absent a cause of action the statute cannot begin to run. As a result, "the thief would be immune from suit after three years [measured from the occurrence of the theft], whereas the good-faith purchaser would remain exposed as long as his identity did not fortuitously come to the property owner's attention." (at pp. 108-109). That fortuitous knowledge of the good-faith purchaser's identity should have the effect of preventing delay in the making of a demand for return of the property, is a consequence of the "unreasonable delay rule", under which the time limited to interpose a cause of action that accrues upon the making of a demand cannot be indefinitely extended by unreasonably postponing the demand (at p. 107, citing, inter alia, Austin v. Board of Higher Education, 5 N.Y.2d 430, 442, 186 N.Y.S.2d 1, 158 N.E.2d 681 [mandamus to compel].

DeWeerth endeavors "to mitigate the inequity of favoring a thief over a good-faith purchaser" (at p. 108) inherent in these accrual rules by extending the unreasonable delay rule, heretofore held applicable only in situations where the plaintiff has actual knowledge of the facts necessary to make a demand, to situations where the plaintiff can be charged with knowledge of such facts by reference to a standard of reasonable diligence. The theory is that if delay in making a demand with knowledge of the whereabouts of stolen property is relevant in determining the timeliness of a replevin action, delay should also be relevant if the whereabouts of stolen property could have been known with a reasonably diligent search. Thus, the fact that the action is brought soon after demand and refusal "does not end the inquiry" (at p. 107); inquiry must also be had into whether a reasonably diligent search could have enabled the plaintiff to make an earlier demand.

Plaintiff urges this court not to follow DeWeerth, criticizing the anomaly described therein as a "mirage", and arguing that it cannot be taken for granted that this action would necessarily have to be dismissed as time-barred were defendant herself the thief, since equity can intervene to estop a thief from asserting the statute of limitations when the thief's concealment of the theft was the cause of the delay in instituting suit (citing General Stencils, Inc. v. Chiappa, 18 N.Y.2d 125, 272 N.Y.S.2d 337, 219 N.E.2d 169; see also, Kunstsammlungen Zu Weimar v. Elicofon, 678 F.2d 1150, 1163 [2nd Cir.]. But to eliminate the anomaly by placing the thief in the same disfavored position as the good-faith purchaser is not to eliminate the potential for stale, hard-to-defend claims created by a rule...