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Protecting Your Art from Title Claims




by:
Pierre Valentin
Withers Bergman LLP/Withers LLP - New Haven Office

 
May 3, 2012

Previously published on May 2, 2012

When purchasing art, note the importance of both researching the art’s provenance, and signing a purchase agreement or a bill of sale with robust warranties and representations with regard to ownership, in order to avoid future title claim issues.

Why title claims are a concern

Unfortunately, it is not uncommon for title claims to arise in the context of art purchases and, due to recent court activity, it is worth a reminder to safeguard your art. Last June, for example, art collector Sharyl Davis, who for 10 years owned and displayed in her home a Camille Pissarro monotype entitled Le Marché, was forced to haplessly surrender the artwork in a forfeiture action initiated by the United States Government. Ms Davis took ownership of Le Marché following the dissolution of a corporation that she had partially controlled. The corporation had purchased the work from an art gallery in Texas in 1985. Unknown to Ms Davis, Le Marché was one of two works of art that were stolen from the Musée Faure in Aix-les-Bains (France), in 1981, and had made its way to San Antonio, Texas, where it was consigned to the gallery that sold it to the corporation.

After displaying Le Marché in her home, Ms Davis consigned it to Sotheby’s for sale at auction. The French National Police became aware of Le Marché’s impending sale and informed United States law enforcement officials that the Pissarro work soon to be auctioned off by Sotheby’s had been stolen from the Musée Faure 22 years earlier. The United States Department of Homeland Security requested that Sotheby’s withdraw Le Marché from the auction and the United States Court of Appeals for the Second Circuit, upholding lower court decisions and a jury verdict of forfeiture based on the art being introduced into the United States contrary to law, ruled in June of this year that Ms Davis must relinquish possession of Le Marché.

If you own art created prior to World War II, you should be aware that claims against collectors possessing art possibly looted during the Holocaust are also on the rise. With the advent of internet technologies publicising the whereabouts of artworks and international policies favoring more intensive provenance research prior to art acquisition, the heirs of families whose collections were lost to the Nazis are now stepping forward to assert title claims. For example, the collector David Bakalar, a Massachusetts resident, was required to initiate a lawsuit in the New York federal courts to quiet title to a watercolour entitled Seated Woman with Bent Leg (Torso) by Egon Schiele. Bakalar purchased the watercolour from a highly reputable New York City gallery in 1963 for $4,300 and had continuous ownership of it until February 2005 when he sold it at auction through Sotheby’s London for approximately $726,000. Sotheby’s then rescinded the sale: it had received a letter challenging Bakalar’s title to the watercolour, written on behalf of the Austrian-court-designated heirs to the Fritz Grünbaum estate, from which the watercolor was purportedly confiscated during the Nazi era. The case is still pending in the courts and Bakalar has the burden of proving good title to the watercolour.

Contested ownership and provenance issues relating to art, such as those of Sharyl Davis and David Bakalar, will continue to occur with increasing frequency, spurred on in part by ready dissemination of information and by the appreciating value of art in recent decades. Accordingly, as art is becoming a distinct asset class, buyers should take appropriate measures to ensure the same transactional confidence they expect in other business contexts.

Ways to protect your art

There are two steps that should be considered when purchasing art and could prevent a purchaser from losing his or her art because of a title claim.

First, asking the seller to obtain a certificate from the Art Loss Register (ALR) is an easy step you can take to minimise the risk of purchasing art with possible title issues. The ALR is the world’s largest private database of lost and stolen art. A search of the ALR would reveal whether the art you are looking to buy is registered as lost or stolen.

Secondly, including robust representation and warranty of the seller’s ownership in your purchase agreement or bill of sale, will strengthen your legal position if a title claim issue surfaces after the purchase.

Purchasing art title protection insurance is another measure you can take to protect your investment in an artwork - unfettered by liens or other claims to ownership. A title insurance policy, such as an ARIS ATPI® policy, can be structured to insure against two general title risks: (i) art provenance/chain of title risks, such as theft and illegal import or export; and (ii) classic title risks, such as security interests, creditor liens and authority to sell.

Following these steps when purchasing art will serve to provide you with significant assurance that you are acquiring good title to the art or, in the case of a claim, that you will receive some financial compensation in the event of loss.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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