New York's Distinctive Rule Regarding Recovery Of Misappropriated Art After The Court Of Appeals' Decision In Mirvish v. Mott

Previously published in Spencer's Art Law Journal, Spring 2012

This essay examines the unsettled case law about owner claims to recover misappropriated art under New York's distinctive demand and refusal rule and the rights of good faith purchasers or innocent recipients of gifts of misappropriated art when the statute of limitations has run in their favor. When these good faith/innocent folks decide to sell, can the owners get their art back from the buyer?—RDS

Introduction

Many are aware that one may gain legal title to real property by "adverse possession"—i.e., by occupying land openly and under a claim of right for the period specified under state law, which is ten years in New York. Public policy favors the active use of land, disfavors efforts to tie up rights in real estate in perpetuity, and, under certain circumstances, rewards misappropriation that is blatant and longstanding.

Personal property, in contrast, is treated differently. That raises the question of whether, and under what circumstances, possession of misappropriated personal property can be transformed into actual ownership. Is the mere passage of time sufficient? Is the expiration of the statute of limitations for conversion—just three years in New York—enough time? Some owners of art might not even notice their property was missing during that time, especially if it were not publicly exhibited. Are there special issues or public policy concerns applicable to fine art, and if so, what are they?

Mirvish v. Mott

Earlier this year, the New York Court of Appeals, the state's highest court, decided Mirvish v. Mott, a case concerning the ownership of The Cry, an erotically-themed monumental bronze sculpture by Jacques Lipchitz, which raised many of these issues.1

Mirvish v. Mott concerned a gift of The Cry by Yulla Lipchitz, the widow of sculptor Jacques Lipchitz, to her companion of nearly 20 years.2 Yulla had given her companion several other works of art over the years, always using a written deed of gift. In the case of The Cry, the 1,100-pound sculpture could not be easily displayed in the New York City apartment the couple shared, so the sculpture was kept in storage, and Yulla made her gift by writing out and handing over an unambiguous, explicit, signed, dated, handwritten statement on the back of a photograph of the The Cry stating that "I gave this sculpture 'The Cry' to my good friend Biond Fury in appreciation for all he did for me during my long illness. With love and my warm wishes for a Happy Future, Yulla Lipchitz / October 2, 1997, New York."

A year later, Hanno Mott, Yulla's son by a prior marriage, who had a power of attorney for his mother, loaned the sculpture in Yulla's name to an exhibit at the Tuileries Garden in Paris adjacent to the Louvre. Mott was unaware of the gift at the time of his loan in his mother's name and Yulla's companion was equally unaware of the loan, thinking that The Cry remained in storage.

After Yulla's death in 2003, her companion sought to retrieve the sculpture from storage, and contacted Mott, who was Yulla's executor as well as a residuary beneficiary of his mother's estate. Mott did not respond to the companion's repeated demands. The frustrated companion sold his interest in the work to Toronto art collector David Mirvish, who demanded the return of the sculpture and was informed that it had been sold to an overseas buyer in 2004. Mirvish then sued the estate and Mott and, in a later, separate lawsuit, once he learned Mott's buyer's identity, sued the buyer. The buyer immediately offered to settle the dispute and, in a settlement joined by Mott, agreed to return The Cry to escrow in New York pending the determination of the ownership of The Cry by the New York courts.

New York's Distinctive Demand and Refusal Rule from Guggenheim v. Lubell

The Mirvish dispute implicated New York's well-known demand and refusal rule, most famously set forth in the landmark 1991 case of Guggenheim v. Lubell.3 Guggenheim involved a claim for a work of art (a gouache by Marc Chagall) that had been stolen from the Guggenheim museum. Decades after the theft, the museum located its painting at the home of a couple that had purchased it in good faith from a New York gallery. The museum sued to recover it.

In New York statute of limitations for conversion is three years, and the statute of limitations for a claim seeking replevin (the recovery of the specific property, rather than money damages for conversion) is keyed to conversion's time limit. In Guggenheim, the Court of Appeals held that, in a claim seeking to recover misappropriated property, the statute of limitations for conversion and replevin only starts to run when the owner makes a demand which is refused, unless a demand would have been futile. The demand and refusal rule had been set forth in earlier New York cases, but Guggenheim reiterated it along with a discussion of its importance in claims relating to artwork in view of New York's strong public policy interest in ensuring that New York does not become a haven for trafficking in stolen cultural property.

Notwithstanding this strong public policy, the Guggenheim decision has been applied unevenly, or ignored, in various Appellate Division (New York's intermediate appellate court) and federal court decisions concerning disputes over property ownership in the two decades since Guggenheim was decided.4 It was therefore reasonable to assume that the Court of Appeals was taking the opportunity to address the confusion concerning the interplay of the statute of limitations and property ownership under the unique facts presented in the Mirvish case.

Surrogate's Court Decision

Because the dispute concerned a claim for personal property against an estate, the court of first instance was the Surrogate's Court, which has jurisdiction over probate matters. In that court, Mott challenged the validity of the gift, although he did not dispute Yulla Lipchitz's intent, her mental capacity, that she was not coerced, or the identification of her handwriting on the deed of gift. He also asserted a statute of limitations defense, arguing that Mirvish's time to file a claim began to run at the time of the 1998 loan to the Louvre and was time-barred, notwithstanding the rule in Guggenheim, which holds that the statute of limitations begins to run at the time of demand and refusal (2004) unless the demand was futile.

Mirvish moved for summary judgment, seeking a determination that he was entitled to The Cry as a matter of law. While that motion was being briefed and argued, Mirvish, Mott and the buyer concluded their settlement agreement, which, as noted above, provided that The Cry would be delivered to whoever prevailed on the issue of ownership. As a result of that settlement agreement, Mirvish argued that Mott's statute of limitations defense was inapplicable, since the expiration of a statute of limitations does not extinguish title under New York law.

On December 31, 2008, the Surrogate's Court decided that Mr. Mirvish was the owner of The Cry. It did not make any finding on Mott's statute of limitations defense—apparently agreeing that it was irrelevant to the determination of ownership, which was the sole issue to be decided given the settlement agreement—and did not mention the Court of Appeals' decision in Guggenheim or New York's demand and refusal requirement, since it was undisputed that demand for The Cry had not been made by the donee until 2004.

Appellate Division Decision

Mott appealed, and the Appellate Division unanimously reversed the Surrogate, finding that the 1998 loan to the Louvre was a conversion that started the time to file a lawsuit seeking the sculpture to run. The Appellate Division likewise did not mention Guggenheim or explain why the demand and refusal requirement would not apply here. Furthermore, the Appellate Division considered an argument by Mott that there was a fact question as to whether Mrs. Lipchitz actually had delivered the written gift instrument to her companion during her lifetime or whether that companion had found the gift instrument among Yulla's belongings after her death.

Questions Left Open by the Court of Appeals' Decision in Mirvish v. Mott

Mirvish then obtained leave to appeal to the Court of Appeals. Because New York's highest court grants leave to appeal in only about six percent of civil cases where there is no dissent in the Appellate Division and no constitutional issue, it was anticipated that the inconsistency of the Appellate Division's decision with the demand and refusal requirement set forth the Court's landmark decision in Guggenheim might be the Court's focus.

In February 2012, the Court of Appeals unanimously reversed the Appellate Division and reinstated the decision of the Surrogate's Court, which had held that Mirvish was the owner of The Cry.5

However, the Court of Appeals' decision is notable for what it did not decide. While the award of The Cry to Mirvish is generally consistent with the longstanding New York rule applied to artwork in Guggenheim, the Court did not so much as mention Guggenheim in its decision and specifically declined to consider the demand and refusal rule. The Court of Appeals reversed the Appellate Division and found that the handwritten deed of gift was sufficient to establish that Mirvish is the owner of The Cry, but relied principally on the terms of the settlement agreement in the separate lawsuit against the party in possession of The Cry to reject Mott's other arguments against Mirvish's right to take possession of the sculpture. The result is a curiously limited decision that calls into question the Court of Appeals' commitment to Guggenheim and how the demand and refusal rule is to be applied going forward.

Accordingly, this is an opportune time to assess the state of the law in New York. This essay aims to identify decisions inconsistent with Guggenheim that are arguably wrongly decided, possible...

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