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WILDENSTEIN & CO. v. WALLIS

February 13, 1991

WILDENSTEIN & CO., PLAINTIFF,
v.
BRENT WALLIS, INDIVIDUALLY, IN HIS CAPACITY AS PRESIDENT OF THE HAL B. WALLIS FOUNDATION, IN HIS CAPACITY AS TRUSTEE OF THE HAL B. WALLIS TRUST AND IN HIS CAPACITY AS EXECUTOR OF THE ESTATE OF HAL B. WALLIS, THE HAL B. WALLIS FOUNDATIONS, THE HAL B. WALLIS TRUST AND THE ESTATE OF HAROLD (HAL) B. WALLIS, DEFENDANTS.



The opinion of the court was delivered by: Cedarbaum, District Judge.

OPINION AND ORDER

This diversity case involves plaintiff Wildenstein & Co.'s claimed interest in important paintings in the collection of the late movie producer and director Hal B. Wallis. Wildenstein, an art dealer, obtained possession of two of these paintings, Monet's "Houses of Parliament" and Gaugin's "The Siesta — A Brittany Landscape," and resold them to Wallis pursuant to a settlement agreement which is the subject of this lawsuit.

Defendants have moved (1) for leave to amend their answer to add the Rule Against Perpetuities as a defense, and for summary judgment based on that defense; (2) for partial summary judgment dismissing the complaint against the estate of Hal B. Wallis and against Brent Wallis as executor on the ground that plaintiff failed to file and preserve its claims in the California probate proceedings; and (3) for leave to add Shearman & Sterling as a defendant on their third counterclaim for breach of a confidentiality agreement. Plaintiff has moved for summary judgment to dismiss defendants' third counterclaim, arguing that there was no breach of a confidentiality agreement and that Shearman & Sterling should not be joined.

Since all of plaintiff's claims depend on the settlement agreement, if the settlement agreement is invalid, defendants are entitled to summary judgment dismissing all of plaintiffs' claims. For the reasons discussed below, defendants' motion for leave to amend their answer and for summary judgment is granted.*fn1

The Facts

The facts considered for purposes of defendants' motion for summary judgment are the undisputed facts and plaintiff's version of the remaining facts.

Hal B. Wallis was an avid collector of Impressionist and Modern works of art. Hal Wallis apparently gave several of these paintings to his wife, Martha Hyer Wallis.

According to the undisputed allegations of the complaint, Martha Hyer Wallis borrowed frequently from money lenders, and often used her property as security for these loans. In August 1980, Mrs. Wallis became acquainted with three confidence men, Harold Pruett, Gerhard Whiffen and Rory Keegan. In November 1980, Mrs. Wallis needed to borrow $1 million for an unknown purpose. Pruett, Whiffen and Keegan offered to assist her, and she apparently indicated a willingness to use some of her paintings as collateral. Some time in late November or early December 1980, Mrs. Wallis, without the knowledge of Mr. Wallis, delivered to Whiffen and Keegan Monet's "Houses of Parliament," Gaugin's "The Siesta — A Brittany Landscape," and two Remingtons to be pledged as collateral for loans, and executed a power of attorney authorizing Whiffen and Keegan to sell the paintings. Further, Mrs. Wallis apparently directed Whiffen and Keegan to have copies of the paintings made in London to be used as replacements to conceal her dealings from Mr. Wallis.

In January 1981, Whiffen and Keegan went to Wildenstein's offices in New York and offered to sell to Wildenstein two of Mrs. Wallis' paintings, "Houses of Parliament" by Monet and "The Siesta — A Brittany Landscape" by Gaugin. Whiffen and Keegan produced a power of attorney and other documents demonstrating their authority to deal in and sell the paintings, and Mrs. Wallis' ownership of them. At the conclusion of this meeting, Wildenstein offered to purchase the two paintings for $650,000. Whiffen and Keegan indicated that this price was unacceptable and departed. However, several days later, on January 8, 1981, Whiffen and Keegan returned to Wildenstein and agreed to sell the two paintings for $650,000. Thereupon, Wildenstein purchased the paintings.

Mrs. Wallis never told Mr. Wallis that she had sold the paintings. On August 20, 1981, after Mr. Wallis learned that Wildenstein had acquired the two paintings, counsel for the Wallises, Jeffrey Glassman, wrote to Wildenstein. In his letter, Mr. Glassman informed Wildenstein that the paintings had been sold without the permission of either Mr. or Mrs. Wallis and demanded their return. Thereafter, Mr. Glassman initiated negotiations with Jeremy Epstein, counsel for Wildenstein, for return of the two paintings. On April 20, 1982, the Wallises and Wildenstein executed a settlement agreement ("the Agreement"). By the Agreement, Wildenstein sold the paintings back to the Wallises in exchange for $665,000, which represented Wildenstein's original purchase price plus its expenses.

In addition, Wildenstein was granted a right of first refusal and an exclusive right of consignment with respect to all fifteen paintings in the Wallis Collection. The provisions granting Wildenstein the purchase option are contained in paragraph 3 of the Agreement:

  If Mr. Wallis, Mrs. Wallis, or, upon their
  decease, the executors of their respective
  estates, receives an offer acceptable to him or
  her for the purchase of any painting . . . now in
  the possession of Mr. or Mrs. Wallis, they shall
  give notice to Wildenstein of such offer and its
  terms and conditions at least thirty (30)
  business days prior to the proposed sale and
  Wildenstein shall have the option to purchase
  such painting upon the same terms and conditions
  as those of such offer by giving Mr. Wallis, Mrs.
  Wallis, or their respective executors notice of
  its election to exercise the option within twenty
  (20) business days after receiving notice of the
  proposed sale.

The provisions granting Wildenstein an exclusive right of consignment are contained in paragraph 4 of the Agreement, which provides in relevant part:

  If Mr. Wallis, Mrs. Wallis, or, upon their
  decease, the executors of their respective
  estates, determines to sell at auction any
  painting [now in the possession of Mr. or Mrs.
  Wallis], such painting shall first be consigned
  exclusively to Wildenstein for sale in accordance
  with the consignment agreement appended hereto as
  Exhibit B.

Paragraph 4 also provides the method for determining the price at which a painting is to be consigned and grants Wildenstein the exclusive right of consignment for six ...


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