The opinion of the court was delivered by: CARTER
Plaintiff John Basmajian, his wife Edna Lee Basmajian and son John Orin Basmajian have moved for judgment on the pleadings in their suit against Christie, Manson and Woods International, Inc. ("Christie's") for breach of contract, breach of fiduciary duty and conversion. In response, Christie's has cross-moved to dismiss the complaint.
John Basmajian spent three years from 1943 to 1946 working as an animator for Walt Disney Productions ("Disney"). Under circumstances more fully detailed in this court's opinion in Walt Disney Productions v. Basmajian, 600 F. Supp. 439 (S.D.N.Y. 1984) (Carter, J.), Disney allowed him to amass a collection of Disney celluloids, sketches and drawings that would otherwise have been sent to its trash heap. Over the years, John and Edna Basmajian matted and framed these increasingly valuable artworks and hung them throughout their home. Their son inventoried the family collection.
On February 29, 1984, the Basmajians signed a contract with Christie's that consigned a number of their artworks to Christie's for sale at auction. The contract was prepared by Christie's and set forth provisions concerning commissions, sellers' warranties, and payment of various expenses, inter alia. Two provisions of that contract are relevant to this dispute:
11. SETTLEMENT OF ACCOUNT: Provided that Christie's has received and collected payment in full from the buyer, Christie s will pay Seller the net proceeds received and collected from the sale of the property thirty-five calendar days after the sale, after deducting its commission, any expenses incurred for Seller's account and any other amounts due it, unless Christie's shall have received notice of the buyer's intention to rescind the sale or of any other claim or shall for any reason have refunded such proceeds to the buyer prior to the expiration of such thirty-five days.
12. HOLD HARMLESS: Christie's as Seller's agent is authorized to accept the return and rescind the sale of any property at any time if Christie's, in its best judgment, determines that the offering for sale of any Property has subjected or may subject Christie's and/or Seller to any liability, including any liability under warranty of authenticity. In such event Christie's is further authorized to refund or credit to the buyer the purchase price of such returned Property and if Christie's has already remitted to Seller any proceeds of the rescinded sale, Seller agrees to pay Christie's on request an amount equal to the remitted proceeds. Seller further agrees to indemnify Christie's and hold it harmless from and against any and all claims, loss, liabilities and expenses (including reasonable attorney's fees) relating to the claims of buyers or persons claiming for buyers resulting from Christie's offering for sale or selling any Property consigned hereunder, whether or not it has been returned to Christie's.
On December 3, 1984, five days before the scheduled December 8 auction, Disney brought an action against John Basmajian and Christie's.
Disney sought to enjoin the auction, claiming that John Basmajian did not lawfully possess the artworks and that any sale would infringe its copyright, 17 U.S.C. § 106. A hearing was held on December 6 and 7, 1984, at which Basmajian was represented by the law firm of Gold, Farrell & Marks and Christie's by Simpson, Thacher & Bartlett. The defendants prevailed. In an opinion with which familiarity is assumed, the court held that "Basmajian has established a prima facie case of lawful possession" of the artwork. Disney, 600 F. Supp. at 441. The court further held that "[i]njunctive relief is inappropriate in any event because all Disney seeks is money." Id. at 442. Disney later voluntarily dismissed the lawsuit.
The auction was held as planned on December 8, 1984. The Basmajians' lots were sold for $496,110, or nearly twice the price that Christie's had estimated. Christie's paid the Basmajians $432,110.66, the total hammer price less commissions of $27,766.60, insurance premiums of $5,012.30, and legal fees of $34,220.44. These legal fees were incurred wholly in connection with the Disney claim. The Basmajians challenge the retention of these fees, claiming that Christie's action violates its contractual and fiduciary duties and constitutes an unlawful conversion. They seek both compensatory and punitive damages.
Neither party contends that the contract is at all ambiguous. The sole question before the court is whether the contract permits Christie's to deduct its legal fees under these unusual factual circumstances. That is purely a question of law, and as such, is susceptible to resolution on summary judgment, Bethlehem Steel Co. v. Turner Construction Co., 2 N.Y.2d 456, 460, 161 N.Y.S.2d 90, 93, 141 N.E.2d 590 (1957) ("where the intention of the parties may be gathered from the four corners of the instrument, interpretation of the contract is a question of law and no trial is necessary") or judgment on the pleadings.
Paragraph twelve of the contract explicitly allows Christie's to deduct particular legal fees from the auction proceeds. In that paragraph, the Basmajians agreed to indemnify Christie's for any "claims, loss, liabilities and expenses (including reasonable attorney's fees) relating to the claims of buyers or persons claiming for buyers. . . . " Disney, of course, was neither a buyer nor a person claiming for a buyer. Thus, there is no express agreement to indemnify Christie's for the expenses involved in defending against the Disney suit. Even if one could plausibly read this clause to cover actions by third-party claimants such as Disney, such creative interpretation would be unwarranted here because Christie's drafted the contract. 67 Wall Street Co. v. Franklin National Bank, 37 N.Y.2d 245, 371 N.Y.S.2d 915, 333 N.E.2d 184 (1975).
The Basmajians ask us to interpret paragraph twelve to mean that the only legal fees for which Christie's can be reimbursed are those connected with buyers' claims. Although this clause does not mandate indemnification, neither does it preclude it. Nothing in the language of paragraph twelve marks it as the exclusive source of reimbursement for attorney's -- or indeed any -- fees.
Paragraph eleven provides the other possible contractual justification for Christie's action. That very broad provision permits Christie's to deduct "any expenses incurred for ...