Judge Stein on Buyers in the Ordinary Course and Shady Art Dealers
The art world has its share of litigation and shady dealers, so buyers beware. In Carroll v. Baker, Judge Stein found that the owner of a valuable painting entrusted to a corrupt dealer for sale could not get it back from the person who purchased it from the dealer - even though the dealer pocketed the entire purchase price and shortly thereafter filed for bankruptcy. Under the doctrine of “buyer in the ordinary course of business” the purchaser was entitled to keep the painting, and the original owner was left holding the bag.
The purchaser, Carroll, sought a declaration that he owned a painting purchased from the once prominent, now defunct, Salander Gallery. The painting was consigned to Salander for sale by Baker, who did not otherwise register or denominate his ownership. Carroll, also a dealer, claimed that Salander never told him that it did not own the painting. Judge Stein found that Carroll “would have had no reason to doubt [Salander’s] ownership of the painting on the basis of its investigation into the painting’s provenance,” and thus qualified as a buyer in the ordinary course under the Uniform Commercial Code. As such, Carroll was entitled to keep the painting. “The Court is not unsympathetic to the plight of Mr. Baker, an innocent person who now bears the burden of Salander’s fraudulent conduct and whose recourse may be limited to attempting to recover from a bankrupt felon. Nonetheless, the Court concludes that Carroll observed “reasonable commercial standards of fair dealing in the art trade….”
For those who follow these matters for reasons of art, the painting at issue was Untitled by John D. Graham, “a twentieth century American modernist painter.” For those who follow for reasons of law, it’s interesting to note that Judge Stein found Carroll credible even though in an unrelated state court lawsuit Justice Gammerman wrote a searing opinion concluding that in that case Carroll had “attempted to perpetrate a fraud on both the plaintiff and the court.” But Judge Stein decided that “what is of importance is whether Carroll has testified truthfully in this action.”