Kozar v Christie's, Inc.

[*1] Kozar v Christie's, Inc. 2011 NY Slip Op 50887(U) Decided on May 18, 2011 Supreme Court, Westchester County Scheinkman, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on May 18, 2011
Supreme Court, Westchester County

Anita Kozar, Dominick Schifano, Linda Falcetti, and John Nicastri, Plaintiffs,

against

Christie's, Inc., KENNETH J. O KEEFE, MARIO CASCONE, and WINDSOR GALLERY CORP., Defendants.



30029/10

 

REISMAN, RUBEO & McCLURE, LLP

By: Mark A. Rubeo, Esq.

Attorneys for Plaintiffs

151 Broadway

Hawthorne, New York 10532

CHRISTIE'S, INC.

By: Caroline Moustakis, Esq.

Attorney for Defendant Christie's 20 Rockefeller Plaza

New York, New York 10020

ALPERT, SLOBIN, RUBENSTEIN, LLP

By: Morton Alpert, Esq.

Attorneys for Defendants Mario Cascone and Windsor Gallery Corp.

233 Broadway

New York, New York 10279

Alan D. Scheinkman, J.

Plaintiffs Anita Kozar ("Kozar"), Dominick Schifano ("Schifano"), Linda Falcetti ("Falcetti") and John Nicastri ("Nicastri") ("Plaintiffs") move, by Order to Show Cause, pursuant to CPLR 6301 and CPLR 7109 for an order granting Plaintiffs a preliminary injunction enjoining Defendants Christie's, Inc. ("Christie's"),[FN1] Mario Cascone ("Cascone") and Windsor Gallery Corp. ("Windsor")[FN2] (collectively "Defendants") and their agents, servants, employees and any auctioneers and/or liquidators on their behalf "from transferring, selling, pledging, assigning or removing from ... [Christie's] place of business, selling at auction or otherwise disposing of the painting in [Christie's] possession known as La Belle Ferronniere' [the painting'] that is the subject matter of this action, during the pendency of this action, and until the ultimate rights of the parties are determined or such other and further order of this Court" (Order to Show Cause dated December 9, 2010 [the "OTSC"]). Plaintiffs also sought pre-answer discovery from Christie's in order to obtain the names of the defendants who consigned the painting to Christie's for auction and Christie's provided Plaintiffs with the names of these Defendants. Plaintiffs thereafter amended their complaint to add Cascone and Windsor and Cascone and Windsor appeared on the return date of this motion (3/25/11) and submitted their opposition.

RELEVANT FACTS AND PARTIES' CONTENTIONS

This action was filed on December 7, 2010 and seeks, among other things, a judgment declaring that Plaintiffs are the rightful owners of the painting and compelling Christie's, Cascone and Windsor to return the painting to Plaintiffs. [*2]

Plaintiffs presented this Order to Show Cause ("OTSC") on December 9, 2010 and at the conference on that date, the Court issued a temporary restraining order ("TRO") enjoining Christie's from transferring, selling, pledging, assigning or removing from its place of business or selling at auction or otherwise disposing of the painting. On the original return date of the OTSC on December 17, 2010, Plaintiffs' counsel submitted a stipulation entered into between Plaintiffs and Christie's in which Christie's agreed (1) to the entry of the preliminary injunction and (2) to provide Plaintiffs with the name and contact information of the person who consigned the painting to Christie's. Because at the time of the proposed stipulation, the John Doe Defendants had yet to be identified and joined in this action and therefore had not yet been heard in connection with this application, and because the stipulation did not address the posting of an undertaking, the Court deleted the paragraphs in the Stipulation relating to the grant of injunctive relief, without prejudice and with leave to re-submit following the appearance of the John Doe Defendants.

The motion was thereafter adjourned on consent to allow for the identification, joinder and service of the Summons and Complaint on the now identified John Doe Defendants. On the adjourned return date — March 25, 2011 — Cascone and Windsor appeared and submitted opposition to the motion.

In support of their motion, Plaintiffs submit their individual affidavits and documentary evidence which they contend establish Plaintiffs' ownership in the painting and Defendants' alleged either wrongful taking and/or wrongful continued possession of the painting. In essence, Plaintiffs contend that the painting was owned by Plaintiffs' family for over 60 years, having been purchased by Anita Kozar's father (who was the grandfather to the remaining Plaintiffs Schifano, Falcetti, Nicastri). It is undisputed that if this Court finds Plaintiffs to be the painting's rightful owners, the painting is owned 1/3 by Kozar, 1/3 by Plaintiffs Schifano and Falcetti, and 1/3 by Plaintiff Nicastri and his three unnamed siblings (Affidavit of Anita Kozar, sworn to November 8, 2010 ["Kozar Aff."] at ¶ 13).

In her affidavit, Kozar avers that the painting is a portrait of Lucrezia Crivelli, a mistress of Lodovico II Sforza, Duke of Milan and patron of Leonardo da Vinci. Plaintiffs assert the painting is one of three known copies — one is alleged to be hanging in the Louvre, one "known as the Hahn' was sold at Sotheby's Auction House in or about January 2010 for $1.5 million" and the third is the painting at issue in this lawsuit (Kozar Aff. at ¶¶ 5-7). She describes her earliest memories of the painting when her father showed it to her when she was 13 years old and she attaches a copy of a photograph of the painting taken by her father and his notes on the back which describe the painting as being painted on a wooden panel (rather than canvas) and his belief that it was painted by " Boltrafio', a pupil of Leonardo da Vinci between 1467 to 1516 or 1452 to 1519" (Kozar Aff. at ¶ 16).

Kozar describes the line of custody of the painting following her father's death in December 1961. She claims that after her sister died in 1998, she took [*3]possession of the painting and prior to her moving to Florida in 2004, she decided to consign her family's artwork, including the painting, to Kenneth O'Keefe who owned a consignment shop in Cos Cob, Connecticut. She claims her decision was based on O'Keefe's representations to her that he had extensive experience and that the artwork would be safe with him. She avers that she was never given a contract or receipt for the artwork by O'Keefe and that he assured her that "he did not issue receipts and that this was certainly an ordinary way of doing business" (Kozar Aff. at ¶ 30). She asserts that at the time she turned over the artwork to O'Keefe, she took pictures of it, including the painting, and she attaches a copy of that picture which has a date of 6/1/04 on its back, which Kozar asserts was right around the time she took the picture prior to giving the painting to O'Keefe. According to Kozar, over the next several months she called O'Keefe to find out if any offers to purchase the painting had occurred and was advised that there had not been none. She contends that when she moved to another location in Florida, she called O'Keefe and when he did not answer she left a message for him. She asserts that "over the next several years, [she] received no communications at all from O'KEEFE" and she assumed that if he had a prospective buyer, he would call her. On September 7, 2009, she called O'Keefe at the number on the business card he had given to her at their first meeting and was advised by him that he had left Cos Cob, had closed his store, and that he "essentially hung up" on her. She avers that she alerted her niece and nephew of her concern over the whereabouts of the artwork and her nephew Schifano followed up with O'Keefe. She asserts that Schifano eventually reached O'Keefe who had advised him that he had donated the family's artwork to charity, but he could not recall which charity and he had no records of the transfer. This conversation is confirmed in Schifano's separate affidavit.

She avers that the family was able to relocate the painting in June 2010 and that in February 2010, the family contacted the Greenwich Police Department to pursue criminal charges but were unsuccessful in their endeavor to have O'Keefe criminally prosecuted. However, in connection with that investigation, O'Keefe gave a statement to the police, which is attached as Exhibit O to Kozar's affidavit. In that statement, O'Keefe admitted to having taken possession of the family's artwork without providing a receipt and that he " either gave away or sold the items for whatever he could get for them'" (Kozar Aff. at ¶ 43). She contends that O'Keefe never had the authority to sell the items without speaking to Kozar first and he never contacted her before giving away or selling the artwork. She states her belief that O'Keefe converted the painting for his own benefit and sold it on the black market (id. at ¶ 44). It is Plaintiffs' position that O'Keefe's failure to provide Kozar with a contract or receipt and the lack of any paperwork concerning O'Keefe's transfer of the painting to a third party is evidence that the conveyance to Cascone/Windsor was not in the ordinary course of the art industry standards and Cascone/Windsor cannot be viewed as bona fide purchasers of the painting (id. at ¶¶ 47-49).

She further avers that without the injunction prohibiting the further transfer of the painting pending the ultimate determination in this action, the painting will likely never again be capable of being located by the family (id. at ¶ 51). [*4]

The affidavit of Schifano repeats much of what is averred to by Kozar, including a confirmation of the substance of his call with O'Keefe. The additional items of information to which Schifano avers are (1) his recollection of being shown the painting by his grandfather and his recollection of certain identifiable characteristics (i.e., that it was painted on wood, that there were hand-sawed marks in the wood, that there was damage to the face and neck of the person, and that there was a reddish or rust colored wax seal on its back) (Affidavit of Dominick Schifano, sworn to November 8, 2008 ["Schifano Aff."] at ¶¶ 7-9); (2) his reading of a New York Post article about Sotheby's auctioning of a copy of "La Belle Ferronierre" on January 28, 2010 for $300,000 to $500,000, his investigation into that painting and his determination that it was not the painting at issue in this action, and the ultimate sale of the Sotheby's painting for $1.5 million (Schifano Aff. at ¶¶ 18-22).

He asserts that once he realized his family would not be receiving assistance from law enforcement, he learned how to recover artwork with the assistance of the internet through the Art Loss Register ("ALR") — a private internet database of lost and stolen artwork which "cross-references registered lost or stolen works of art with items up for auction at the major auction houses in the world. In the event a match is found, ALR then assists their customers in recovering the artwork. In exchange for these services, the ALR is paid a fee, usually from the sale of the item" (id. at ¶ 28). He avers that he entered into a contract with ALR in February 2010 and provided them with the documentary proof ALR required in order to register the painting. He asserts the family was advised on June 1, 2010 that ALR had located a copy of the painting that appeared to be a potential match and that it was to be sold at an auction at Christie's on June 9, 2010. ALR contacted Christie's as well and in an e-mail attached as Ex. CC to Schifano's Affidavit, Christie's advised ALR as to how it had received the painting — i.e., "the painting was consigned to them by the owner of an art gallery ... who claimed to have bought the painting in the late 1980s to early 1990s" (id. at ¶ 36, Ex. CC). According to Schifano, on June 9, 2010, ALR notified Christie's that the painting had been taken from Kozar in 2004 and ALR further requested that Christie's provide it with the documentation supporting the purchase of the painting by Cascone and Windsor. He avers ""[l]ess than four hours later, CHRISTIE'S notified the ALR that La Belle Ferronniere' had been withdrawn from the planned auction" (id. at ¶ 38). He avers that neither Christie's nor Cascone/Windsor has provided any evidence substantiating Cascone/Windsor's ownership of the painting and their claim that they had no contacts with O'Keefe in connection with the purchase (id. at ¶¶ 39-40).

Schifano also describes the investigation performed by ALR, which included its determination that an art gallery called Rose Hill Galleries operating in New Jersey had advertised the painting on an internet site and that Cascone/Windsor had paid $1600 for it. Schifano avers to his viewing of the painting at Christie's on June 23, 2010 and his immediate identification of it as the same one his grandfather had shown to him 45 years earlier.

Schifano avers that ALR compared the photo of the painting that was [*5]taken by Kozar before O'Keefe took possession of it and a current photo of the painting taken at Christie's and confirmed that "although JOHN DOE had some restorative work done to the painting, both photographs clearly matched" (id. at ¶ 48). Schifano attaches as an exhibit a copy of ALR's report confirming that the painting is the same painting that was owned by Plaintiffs. Schifano contends that given the irregularities in the transaction including the bargain basement price paid, and given that Cascone is the owner of an art gallery, he cannot claim to be a bona fide purchaser acting in accordance with art industry standards (id. at ¶ 36).

The affidavit of Linda Falcetti basically reiterates what is stated in the affidavits of Kozar and Schifano. She adds details concerning contacts she made with the United States Attorney's Office and the FBI's Art Crime Squad and their failure to intercede on Plaintiffs' behalf given the involvement with the Greenwich Police Department (Affidavit of Linda Falcetti, sworn to November 8, 2010 ["Falcetti Aff."] at ¶¶ 17-18). She also attaches a letter from the Greenwich Police Department from May 2010 as Ex. P advising Plaintiffs that there was nothing they could do and that Plaintiffs had to deal with the Norwalk Police Department.[FN3] However, when Plaintiffs contacted the Norwalk Police Department, they were advised that Norwalk Police Department had no jurisdiction over the matter and that the matter had to be addressed by the Greenwich Police Department (id. at ¶ 24).

Finally, she avers to ALR's contact with John Doe and the offer made to pay him the $1600 he paid for the painting in exchange for the painting's return to the family, but that John Doe refused their offer and counter-offered to sell it back to the family for $30,000 (Falcetti Aff. at ¶¶ 32, 34). She attaches e-mails between ALR and Christies wherein Christies summarizes John Doe's claimed ownership of the painting since the 1980s or 1990s, which Falcetti asserts is false since the painting was in the possession of Plaintiffs at that time (id. at 33).

In Nicastri's Affidavit, he merely states that he adopts the statements of the other Plaintiffs concerning the family tree and Plaintiffs' ownership of the painting, and that while he has no personal knowledge of any of the underlying facts, he joins in the application for injunctive relief (Affidavit of John Nicastri, sworn to October 13, 2010).

As for their legal argument, Plaintiffs contend they have made the requisite showing for the issuance of an injunction under CPLR 7109 and CPLR 6301 [*6]by showing the uniqueness of the chattel,[FN4] a likelihood of success on the merits, irreparable injury and a balance of the equities in Plaintiffs' favor. They contend they have shown a reasonable likelihood of success on the merits [FN5] of their replevin action given Plaintiffs' proof of their ownership of the painting and their contentions that (1) the painting was given to O'Keefe under false pretenses, (2) the painting was sold by O'Keefe for a bargain basement price, (3) demand has been made for the return of the painting, (4) Plaintiffs conducted a thorough and diligent search and there is no basis for an assertion of laches by Defendants, and (5) John Doe's status as a merchant under the Uniform Commercial Code ("UCC") eliminates his ability to claim that he was a good faith purchaser for value (i.e., he was required to take additional steps to verify the true owner of a piece of artwork). Plaintiffs further argue that they have also established irreparable injury absent the grant of an injunction given the uniqueness of the chattel (i.e., it cannot be replaced) and that without the injunction, Plaintiffs will likely never locate the painting again. Finally, Plaintiffs argue that the equities balance in their favor since there is no prejudice to Defendants if Christie's is required to hold the painting until this Court determines the painting's rightful owner.

As noted above, Christie's has not put in any opposition to the motion and, indeed, was willing to agree to the injunction pending the ultimate determination in this action.

Defendants Cascone/Windsor submit a two-page affirmation from their counsel, Morton Alpert, Esq. of Alpert, Slobin & Rubinstein, LLP. Mr. Alpert argues that in Kozar's affidavit, Kozar does not allege that the artwork was stolen — only that the consignee O'Keefe breached an oral consignment agreement which has no impact on the passing of title to Cascone/Windsor. He further affirms, without providing any basis for his personal knowledge, that Cascone was a restauranteur in New York City for many years and "later opened a small antiques retail store in Englewood, N.J. He never held himself out as an experienced art expert or connoisseur" (Affirmation in Opposition of Morton Albert, Esq. dated March 18, 2011 at ¶ 4). Finally, counsel asserts that "[i]n the event this Court should decide to grant ... [the] preliminary injunction ... than a bond should be required of plaintiffs pursuant to CPLR 6312(b) in the amount of $40,000 which Christie's has estimated to be the value of the Work of [*7]Art" (id. at 5).

Cascone/Windsor's counsel's affidavit is without evidentiary value (David Graybeard, Inc. v Bank Leumi Trust Co., 48 NY2d 554 [1979] [counsel's affidavit without evidentiary value because not based on personal knowledge]; Do Sabato v Soffes, 9 AD2d 297, 301 [1st Dept 1959] [attorney affidavit without personal knowledge has no probative value and should be disregarded]). The Court notes that the statement that Christie's estimated the value of the Work of Art to be $40,000 is not quite accurate; counsel appears to be referring to the statement by Dominick Schifano, in his affidavit (¶32) that ALR had advised him that the piece was due to be sold on June 9, 2010 with a starting bid of $40,000. Even assuming this information to be accurate, the fact that the starting bid was $40,000 is not an estimate of value. Obviously, an auction house wants to start the bidding at a number low enough to attract interest but not so high as to discourage bidders. There is no assurance that anyone would offer $40,000 and, on the other hand, the possibility exists that the painting would go for more than that.

LEGAL DISCUSSION

THE GOVERNING LEGAL STANDARD FOR A PRELIMINARY INJUNCTION

"CPLR 7109 authorizes a court to grant a preliminary injunction where the chattel is unique ... [but] Plaintiffs still must meet the requirements for a preliminary injunction .... " (Danae Art Intl. Inc. v Stallone, 163 AD2d 81, 82 [1st Dept 1990]). Those requirements are (1) a likelihood of success on the merits, (2) irreparable injury absent the granting of the injunction, and (3) a balance of equities in the movant's favor (Nobu Next Door, LLC v Fine Arts Hous., Inc., 4 NY3d 839 [2005]; Apa Sec., Inc. v Apa, 37 AD3d 502 [2d Dept 2007]). While the existence of an issue of fact will not defeat a motion for injunctive relief which demonstrates the required elements (CPLR 6312[c]), the movant must show a clear right to relief which is plain from the undisputed facts (Matter of Related Prop., Inc. v Town Bd. of Town/Village of Harrison, 22 AD3d 587 [2d Dept 2005]; Stockley v Gorelik, 24 AD3d 535 [2d Dept 2005]).

The Court is satisfied (and, indeed, Defendants Cascone and Windsor do not dispute) that Plaintiffs have satisfied the requirement of showing that the chattel at issue — a painting from the 17th to 19th century — is unique and irreplaceable. To show that an item is unique, plaintiff must show "that it is not a mass-produced item readily available on the market, such that a money judgment enabling purchase of a replacement would be an adequate remedy" (Christie's Inc. v Davis, 247 F Supp 2d 414, 424 [SD NY 2002]). Items that have been found to be unique are heirlooms, works of art, patents and inventions, and particular shares of stock with peculiar investment features (Staff v Hemingway, 47 AD2d 709 [4th Dept 1975]; Morose v Penzimer, 58 Misc 2d 156, 159 [Sup Ct Oneida County 1968]). [*8]

A.Plaintiffs Have Made a Sufficient Showing of a Likelihood of Success on the Merits

In cases such as this where the "denial of injunctive relief would render the final judgment ineffectual, the degree of proof required to establish the element of likelihood of success on the merits should be accordingly reduced" and "the equities lie in favor of preserving the status quo" (Republic of Lebanon v Sotheby's, 167 AD2d 142, 143 [1st Dept 1990]; State v City of New York, 275 AD2d 740 [2d Dept 2000]).

The Court agrees with Plaintiffs that, in analyzing the ownership rights of Plaintiffs vis a vis Cascone and Windsor, the provisions of the UCC must be considered as the purchase and sale of works of art are subject to the provisions of the UCC (Porter v Wertz, 68 AD2d 141 [1st Dept 1979], affd 53 NY2d 696 [1981]).

Furthermore, art is subject to the usual rule that a thief of property is generally not able to convey good title, even to a bona fide purchaser (DeWeerth v Baldinger, 836 F2d 103 [2d Cir 1987], cert denied 486 US 1056 [1988]; Solomon R. Guggenheim Foundation v Lubell, 153 AD2d 143 [1st Dept 1990], affd 77 NY2d 311 [1991]). However, "[u]nlike a thief, an entrustee has voidable, as opposed to void, title, and therefore can pass good title to a third party" — i.e., a good faith purchaser for value (Interested Lloyd's Underwriters v Ross, 2005 WL 2840330 at *5 [SD NY 2005]).

Under the UCC, a good faith purchaser for value from a person who was entrusted with goods may be found to be the owner of the goods in question even if the entruster violated his agency agreement with the original owner. UCC 2-403 (subdiv. 2)[FN6] provides that an owner who entrusts an item to a merchant who deals in goods of [*9]that kind gives the merchant power to transfer all rights of the owner to a buyer in the ordinary course of business.

Under this provision, a buyer in the ordinary course of business will prevail over the claim of an owner who entrusted such items to the merchant (Graffman v Espel, 1998 WL 55371 at *3 [SD NY 1998], affd 201 F3d 431 [2d Cir 1999]). For purposes of the statute, a buyer in ordinary course of business "means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices (UCC 1-201[9]). UCC 2-103(b) provides that ' [g]ood faith' in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade" (UCC 2-103[b]).

"The entrustment provision of the U.C.C. is designed to enhance the reliability of commercial sales by merchants who deal in the kind of goods sold by shifting the risk of resale to one who leaves his property with the merchant ... When a person knowingly delivers his property into the possession of a merchant dealing in goods of that kind, that person assumes the risk of the merchant's acting unscrupulously by selling the property to an innocent purchaser. The entrustment provision places the loss upon the party who vested the merchant with the ability to transfer the property with apparent good title. Thus, a defendant may be protected by Section 2-403(2) when, (1) the goods have been entrusted to a merchant who deals in goods of that kind; and (2) the defendant has bought the goods from that merchant in the ordinary course of business" (Graffman, supra, 1998 WL 55371 at *3 [citations omitted]). "Even where any agent has violated his or her instructions, Section 2-403 may operate to bind the principal such that the purchaser acquires good title from the principal's agent" (id.).

UCC 2-104(1) defines a merchant as [*10] a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill (UCC 2-104[1]).

"Merchants, as opposed to other purchasers, are held to a higher standard of good faith' under the buyer in the ordinary course of business' analysis ... A merchant, therefore, might be required under the UCC to take additional steps to verify the true owner of a piece of artwork" (Brown v Mitchell-Innes & Nash, Inc., 2009 WL 1108526 at *5 [SD NY 2009]).

In Porter v Wertz (68 AD2d 141 [1st Dept 1979], affd 53 NY2d 696 [1981]), plaintiffs entrusted a painting to an art merchant. Defendant art gallery purchased the painting from defendant seller — an employee of a deli that the art merchant frequented. Plaintiffs sued to recover the painting and defendants asserted the affirmative defenses of UCC 2-403 and equitable estoppel. The Appellate Division, First Department reversed the trial court's dismissal of the complaint and entered judgment in plaintiffs' favor concluding that plaintiffs were not barred by either defense since UCC 2-403 did not apply because defendant seller was not an art dealer and the sale was not within defendant's ordinary course of business. Further, because defendant art gallery had not relied on defendant seller's apparent authority to sell the painting, there was no basis for the estoppel defense. In also finding that the purchaser had a duty to inquire into the true ownership of the art being purchased, the First Department held The ... [buyer's] claim that the failure to look into [the seller's] authority to sell the painting was consistent with the practice of the trade does not excuse such conduct. This claim merely confirms the observation of the trial court that "in an industry whose transactions cry out for verification of ... title ... it is deemed poor practice to probe ...." Indeed, commercial indifference to ownership or the right to sell facilitates traffic in stolen works of art. Commercial indifference diminishes the integrity and increases the culpability of the apathetic merchant (Porter, 68 AD2d at 149).

The New York Court of Appeals agreed with the Appellate Division and affirmed its holding that neither UCC 2-403 nor equitable estoppel applied and further noted the First Department's alternative holding that even if UCC 2-403 applied, it was a departure from commercial standards for defendant gallery to fail to inquire concerning the title to the painting and to fail to question the defendant seller's [*11]credentials as an art dealer (Porter, 53 NY2d at 700). Thus, the law in New York is that "a dealer in art must take reasonable steps to inquire into the title to a painting, particularly if there are warnings that something is wrong with the transaction" (Morgold, Inc. v Keeler, 891 F Supp 1361, 1368 [ND Ca 1995], citing Porter, supra and Cantor v Anderson, 639 F Supp 364 [SD NY 1986], affd 833 F2d 1002 [2d Cir 1986]).

While the precise parameters of the obligation owed by a dealer in art have not been fully defined,[FN7] it appears to be generally accepted that, as a minimum requirement, a merchant dealing in art work would be under a duty to make a further inquiry as to a painting's ownership in the event there are suspicious circumstances underlying the transaction, such as a bargain basement price (Leonardo Da Vinci's Horse, Inc. v O'Brien, 761 F Supp 1222, 1227-1228 [ED Pa 1991]).[FN8]

Here, with Christie's having set opening bids on this painting at $40,000 and with Cascone and Windsor not having denied that they paid only $1600 for the painting, there is a likelihood that Cascone and Windsor will not be protected by UCC 2-403. The red flag of the bargain price they paid would cast upon them the duty to have undertaken a good faith investigation into the painting's ownership. Because Cascone and Windsor have provided no facts in opposition to this motion in this regard, the Court finds that Plaintiffs have satisfied the first prong for the grant of injunctive relief — a likelihood of success on the merits.

B.Plaintiffs Have Established Irreparable Injury

Given that the painting at issue was from the 17th to 19th century, that it is not possible to create an original painting from this time period, the extensive efforts it took to locate the painting, and given that, barring an injunction, Plaintiffs may never locate this painting again, Plaintiffs have established that they will suffer irreparable injury without the grant of an injunction pending the ultimate determination over ownership of the painting in this action. C.Balancing of the Equities[*12]

Plaintiffs have also established that a balancing of the equities tips in their favor since a denial of injunctive relief would be extremely prejudicial to them whereas the grant of injunctive relief simply means the Cascone and Windsor will be delayed in their ability to sell the painting. Because they have not established that there will no longer be a market for this painting should the sale be delayed, the Court finds that the equities tip in favor of the granting of Plaintiffs' motion for injunctive relief.

D.Plaintiffs Must File an Undertaking in the Amount of $20,000

CPLR 6312 requires that, prior to the granting of a preliminary injunction, the plaintiff shall be required to give an undertaking, in an amount to be fixed by the Court, for all damages and costs that may be sustained by reason of the injunction. The only exception to the requirement that an undertaking be posted is found in CPLR 2512 which exempts the state, municipal corporations or public officers on behalf of such governmental entities from the requirement that an undertaking be posted. The Appellate Division, Second Department has consistently held that, given the clear and unequivocal mandate of CPLR 6312, there is no authority which permits the court to grant an injunction to a private party without requiring the giving of an undertaking (see, e.g., Ying Fung Moy v Hohi Umeki, 10 AD3d 604 [2d Dept 2004]; Livas v Mitzner, 303 AD2d 381 [2d Dept 2003]; Schwartz v Gruber, 261 AD2d 526 [2d Dept 1999]; Carter v Konstantatos, 156 AD2d 632 [2d Dept 1989]; Litwa v Litwa, 89 AD2d 581 [2d Dept 1982]; Smith v Boxer, 45 AD2d 1054 [2d Dept 1974]).

The purpose of an undertaking is to provide a "ready source from which the defendant may recover for damages" sustained by reason of a preliminary injunction that is later found to have been improperly granted (Margolies v Encounter, Inc., 42 NY2d 475, 479 [1977]; J.A. Preston Corp. v Fabrication Enter., Inc., 68 NY2d 397 [1986]; see also CPLR 6312[b]). The amount of an undertaking must be rationally related to the amount of potential damages that Defendants might sustain (see, e.g., Ujueta v Euro-Quest Corp., 29 AD3d 895 [2d Dept 2006]); Blueberries Gourmet, Inc. v Aris Realty Corp., 255 AD2d 348 [2d Dept 1998]).

Cascone and Windsor request that the Court set the undertaking in the amount of $40,000.00 representing the opening bid level set by Christie's. At the hearing on the TRO, Plaintiffs argued that the undertaking should be in the amount that Defendants paid for the painting — $1600.

If it is ultimately determined that this injunction was improperly issued, the damages Cascone and Windsor would suffer would be the deprivation of their right to the immediate sale of the painting during the period that this injunction was in effect. Because Defendants have not set forth any evidence that they would suffer a total loss in the value of the painting (i.e., the $40,000 value estimated by Christie's) if they are enjoined from the immediate sale of the painting, the Court finds $20,000 to be the [*13]appropriate amount at which the undertaking should be set since it should be more than sufficient to cover any damages Cascone and Windsor would suffer during the pendency of this action (see Visual Equities Inc. v Sotheby's, Inc., 199 AD2d 59 [1st Dept 1993] [$1,000,000 bond set in connection with an injunction against the sale of the Declaration of Independence reduced to $278,000]; Republic of Lebanon v Sotheby's, 167 AD2d 142, 143 [1st Dept 1990] [bond in the amount of $14,000,000 for a silver treasure reduced to $1,000,000 even though Sotheby's estimated the value of the silver was $70,000,000]).

CONCLUSION

The Court has considered the following papers in connection with this motion:

1)Order to Show Cause dated December 9, 2010; Affirmation of Mark A. Rubeo, Jr., Esq. dated December 6, 2010, together with the exhibits annexed thereto; Affidavit of Anita Kozar, sworn to November 8, 2010; Affidavit of Dominick Schifano, sworn to November 8, 2010; Affidavit of Linda Falcetti, sworn to November 8, 2010; Affidavit of John Nicastri, sworn to November 8, 2010;

2)Plaintiffs' Memorandum of Law in Support of their Order to Show Cause Seeking a Preliminary Injunction and Pre-Answer Discovery dated December 3, 2010;

3)Opposing Affirmation of Morton Alpert dated March 18, 2011.

Based upon the foregoing papers, and for the reasons set forth above, it is hereby

ORDERED that the motion by Plaintiffs Anita Kozar, Dominick Schifano, Linda Falcetti, and Jon Nicastri for a preliminary injunction is granted; and it is further

ORDERED that Defendants Christie's, Inc., Mario Cascone and Windsor Gallery Corp. , and their agents, servants, employees and any auctioneers and/or liquidators on their behalf, are hereby enjoined and restrained, during the pendency of this action, from transferring, selling, pledging, assigning or removing from the place of business of Christie's Inc., selling at auction or otherwise disposing of the painting now in the possession of Christie's Inc. known as "La Belle Ferronniere"; and it is further [*14]

ORDERED that Plaintiffs shall give an undertaking in the sum of $20,000 conditioned that Plaintiffs, if it is finally determined that it was not entitled to an injunction, will pay to Defendants Christie's Inc., Mario Cascone and Windsor Gallery Corp. all damages and costs which may be sustained by reason of this injunction; and it is further

ORDERED that if the undertaking provided for in the preceding decretal paragraph is not filed with the Clerk of the Court (courtesy copy to Chambers ) by May 31, 2011, then Defendants may submit to this Court, on (1) day's notice to counsel for Plaintiffs, an order vacating forthwith all injunctive relief hereinbefore or hereinabove granted; and it is further

ORDERED that pursuant to this Court's preliminary conference order dated March 25, 2011, counsel for all parties shall appear before this Court for a trial readiness conference on September 30, 2011 at which time counsel shall represent that all discovery is complete, which date may not be adjourned without the advance written approval of this Court.

The foregoing constitutes the Decision and Order of this Court.

Dated:White Plains, New York

May 18, 2011

E N T E R :

__________________________

Alan D. Scheinkman

Justice of the Supreme Court Footnotes

Footnote 1:Kenneth J. O'Keefe ("O"Keefe") is also a defendant in this action but because he neither possesses the painting nor has any ownership claim in the painting, Plaintiffs have not sought an injunction against him.

Footnote 2:The Notice of Motion and moving papers actually refer to Cascone and Windsor as the John Doe Defendants. However, as explained more fully herein, the John Doe Defendants have now been supplanted with Cascone and Windsor.

Footnote 3:Falcetti goes into great detail about her conversations with various police officers from the Greenwich and Norwalk Police Departments and her contention that the statements made in the May 2010 Greenwich Police Department's letter were false (Falcetti Aff. at ¶ 26). Because the only possible relevance of these communications is that Plaintiffs made efforts to locate the painting through law enforcement — the substance of those conversations is irrelevant and will not be delved into herein.

Footnote 4:Plaintiff contends that "[a]rt work created in Europe during the 17th through 19th centuries is, as a matter of law, unique chattel, as these items are clearly unique, have historical and artistic value that makes them relatively rare, are impossible to replace through manufacturing, and are attractive to collectors and dealers" (Pltfs' Mem. at 2).

Footnote 5:Plaintiffs assert that the documentation they provided concerning their ownership of the painting was sufficient to cause (1) ALR to assert a claim of ownership on behalf of Plaintiffs to Christie's and (2) Christie's to remove the painting from the auction block (Pltfs' Mem. at 4).

Footnote 6:UCC 2-403 states, in relevant part:

(1)A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been

delivered under a transaction of purchase the purchaser has such power even though

(a)the transferor was deceived as to the identity of the purchaser, or

(b)the delivery was in exchange for a check which is later dishonored, or

(c)it was agreed that the transaction was to be a "cash sale", or

(d)the delivery was procured through fraud punishable as larcenous under the criminal law.

(2)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.

(3)"Entrusting" includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods has been such as to be larcenous under the criminal law.

Footnote 7:Although the Court of Appeals in Porter, supra, did not specifically hold that an art merchant had a duty to inquire into the provenance of a painting, it appeared to note the Appellate Division, First Department's affirmative decision on this issue with approval.

Footnote 8:One court noted that "[m]any lower courts have held that to be a purchaser in the ordinary course within the meaning of § 2-403 an art dealer must investigate the provenance of a work of art being purchased, even if the work is being purchased honestly and from a reputable dealer" (Interested Lloyd's Underwriters v Ross, 2005 WL 2840330 at *5 [SD NY 2005] citing Morgold, Inc., supra; Porter, supra; Graffman, supra; Cantor, supra).