ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Thursday, May 11, 2023

Detroit Institute of Art Settles Dispute over Provenance of a Van Gogh

When I was in practice, one of the partners in my firm was a prominent art lawyer.  His cases were fascinating.  One involved a well-known art dealer who was given a painting to show at various galleries but then sold it and fled the country.  I can't remember whether he was covering gambling debts or paying for a divorce.  It was one of those.  The partner told me, in essence, "These things happen."  Even though the works of art are worth millions, people's livelihoods depend on their reputations, and so transactions are done based on handshakes and relationships.  The players all know each other, so the danger of conversion is thought to be small.  Until it isn't. 

Van Gogh LiseuseWhen I teach Sales, I sometimes come across such cases, and they implicate the doctrine of entrustment under UCC § 2-403(2), which provides:  "Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business."  I suspect there was an entrustment issue involved in the controversy between Brazilian collector Gustavo Soter and the Detroit Institute of Art (DIA) over Vincent Van Gogh's painting, Une liseuse de roman (above).   

Claire Voon reported for The Art Newspaper in January that the painting was on loan to DIA.  Mr. Soter alleged that the painting had been stolen from him.  Mr. Soter claimed that he had bought the painting for $3.7 million and then transferred it to an unnamed third party without relinquishing title to it.  That unnamed third party then allegedly absconded with the painting and its whereabouts were unknown for years. U.S. District Court Judge George Caram Steeh found that the museum was blameless but encouraged the parties to settle their dispute, and ordered DIA not to allow the painting to be moved until the matter was settled. The exhibit of which the painting is a part was set to close at the end of January, and so the court ordered DIA to hold onto the painting until the matter could be resolved

The museum took the position that, under the federal Immunity from Seizure Act, no court could tell it what to do with the painting, as it had exercised due diligence before accepting the painting for exhibition.   It argued that the complaint should be dismissed.  Otherwise, the argument goes, foreign lenders would not send their paintings to be exhibited in the United States.  Courts could issue injunctions, and the paintings could be held in limbo.  

Fortunately, as Ed White reported in Fortune, in March Mr. Soter and Brokerarte Capital Partners LLC, his sole-owned company, reached a deal with the unnamed entity that transferred the painting to DIA.  Now the painting can be released from captivity, but the details of the deal are otherwise unknown.  While Mr. Soter dropped his claim for injunctive relief.  However, as of March, DIA did not consider the matter resolved.  It wanted the District Court vacate its decision granting the injunction so as to deprive it of precedential value.

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Two points worth mentioning:
1. A voluntary bailment of the painting would indeed be an “entrustment,” as defined in U.C.C. § 2-403. But, as you note, to lose title under § 2-403, the owner must not only entrust the painting (which it allegedly did) but entrust it to a merchant who deals in goods of that kind who in turn sells to a buyer in ordinary course of the merchant’s business. If the entrustee merely “absconds” with the goods, the owner’s right to recover them is not affected.
2. The Federal Immunity from Judicial Seizure Act, 22 U.S.C. § 2459 says that it applys only “if before the importation of such object the President or his designee has determined that such object is of cultural significance and that temporary storage, conservation, scientific research, exhibition, or display within the United States is in the national interest, and a notice to that effect has been published in the Federal Register.” Absent such a determination, the owner should be able to recover stolen goods on display.

Posted by: Sidney DeLong | May 19, 2023 9:08:43 AM