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SPANIERMAN GALLERY v. MERRITT

August 9, 2004.

SPANIERMAN GALLERY, Profit Sharing Plan, Plaintiff,
v.
MARY MERRITT, Defendant. UNITED STATES OF AMERICA, Plaintiff, v. SPANIERMAN GALLERY, PSP, and MARY MERRITT, Defendants.



The opinion of the court was delivered by: THEODORE KATZ, Magistrate Judge

MEMORANDUM OPINION

On June 30, 2004, by leave of the Court, Defendant Mary Merritt amended her Answers in these consolidated declaratory judgment and interpleader actions, to assert counter- and cross-claims against Spanierman Gallery, for a declaratory judgment that she possesses superior title to Arthur Wesley Dow's painting, the "Grand Canyon" ("the painting"), and, in turn, for an order requiring the return of the painting.*fn1 Plaintiff Spanierman Gallery ("Plaintiff" or "Spanierman") has moved for summary judgment on these claims, pursuant to Fed.R.Civ.P. 56, on the grounds that: (1) Merritt's claims are barred by the statute of limitations; and (2) Merritt released all claims against third parties, including Spanierman Gallery, relating to the painting, in a "Settlement Agreement" between Merritt and Timothy Fagan, executed on September 14, 1999.

The parties have consented to trial before this Court pursuant to 28 U.S.C. § 636(c). For the following reasons, Plaintiff's motion for summary judgment is denied.

  BACKGROUND

  The Court recites only those facts relevant to the instant motion,*fn2 and, unless otherwise noted, the following facts are undisputed. On February 16, 1998, Merritt invited a local art and antiques dealer, Timothy Fagan, to her home to assist her in preparing to move into a smaller residence. Merritt's niece, Katra Showah, was also present. At the end of that visit, Fagan left Merritt's home with, among other items, the painting. At the center of this dispute is whether Merritt sold the painting to Fagan, as Spanierman Gallery contends, or whether Merritt, as she contends, merely permitted Fagan to take the painting for the limited purpose of having it appraised.

  Approximately three months later, in May 1998, Fagan sold the painting to Spanierman Gallery through Craftsman Auctions, in Pittsfield, Massachusetts, for $150,000. Merritt claims to have been unaware of this sale until September 1999. (Affidavit of Mary Merritt, dated Sept. 6, 2000 ("Merritt Aff."), ¶ 11, attached as Ex. A to Affirmation of Elisabeth Seieroe Maurer, Esq., dated July 20, 2004 ("Maurer Affirm.").) Merritt further claims that Fagan failed to respond to her inquiries about the painting between February 1998 and September 1999, and that she therefore sought the assistance of an attorney, John Bonee III, Esq. (See id. ¶¶ 12-13.)

  On September 14, 1999, Merritt, Showah, and her attorney, Bonee, met with Fagan and his counsel regarding the painting, at which time attorney Bonee handwrote, and Merritt and Fagan both signed, a "Settlement Agreement" ("the Agreement"), under which Fagan promised to, among other things (1) pay Merritt a total of $40,000 over time; (2) provide certain information to Merritt concerning the painting's sale, such as the auction catalogue; and (3) to assist in verifying information about the sale, including the sale price and buyer. In return, Merritt was to release any claims against Fagan, and not to pursue claims against any third party. There are factual disputes with regard to Fagan's compliance with the Agreement's terms, including whether Merritt prevented Fagan's compliance. At the meeting, and subsequent thereto. Fagan provided Merritt with some information regarding the sale of the painting, but he did not make any payments under the Agreement.

  Merritt commenced an action against Fagan in November 1999, in Connecticut state court, alleging, inter alia, conversion. In January 2000, Merritt retained her current counsel, Elisabeth Seieroe Maurer, Esq., to represent her in the Connecticut action. Upon her retention, Maurer contacted the FBI to report Merritt's loss of the painting. The FBI conducted an investigation, and seized the painting in January 2000. Ultimately, the United States Attorney's Office commenced the instant interpleader action, naming Spanierman and Merritt as Defendants.

  On August 2, 2000, Spanierman Gallery commenced the instant declaratory judgment action, claiming that it is the painting's rightful titleholder. Shortly thereafter, Merritt moved to dismiss the action, asserting, inter alia, that her claims against Fagan in the Connecticut court action would be dispositive of Spanierman's claims to the painting's title. Fagan had defaulted in the liability phase of the Connecticut action, and in May 2002, the Connecticut Superior Court for the Judicial District of Danbury entered judgment in Merritt's favor on her conversion and related claims. See Merritt v. Fagan, No. CV990337866S, 2002 WL 1331839 (Conn. Super. Ct. May 17, 2002) (unpublished opinion). In an Opinion and Order dated February 6, 2003, the Court (Swain, J.) denied Merritt's motion to dismiss, and held that the Connecticut action had no preclusive effect in this action. See Spanierman Gallery, 2003 WL 289704, at **3-5.

  A trial in this action is scheduled to commence on August 10, 2004. In the course of preparing for the trial. Spanierman made known its position that Merritt has never asserted an actual claim to the painting in either of these actions. The Court granted Merritt leave to amend her Answers to assert such claims. Plaintiff's summary judgment motion followed. The motion seeks to preclude Merritt from asserting her replevin claims on the grounds that they are barred by the statute of limitations and/or the general release provision contained in the Settlement Agreement between Fagan and Merritt.

  DISCUSSION

  I. The Summary Judgment Standard

  Summary judgment is appropriate only when the submissions of the parties, taken together, "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In deciding a motion for summary judgment, the Court "must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor." Am. Cas. Co. of Reading, Pa. v. Nordic Leasing, Inc., 42 F.3d 725, 728 (2d Cir. 1994) (quoting Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 572 (2d Cir. 1993)); see also Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 2110 (2000) ("Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.") (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513 (1986)); Hayut v. State Univ. of New York, 352 F.3d 733, 743 (2d Cir. 2003). The moving party must "inform[] the district court of the basis for its motion" and identify the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553 (1986). If the moving party meets this burden, the burden shifts to the nonmoving party to come forward with "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e).

  A party opposing a motion for summary judgment "may not rest on the pleadings but must further set forth specific facts in the affidavits, depositions, answers to interrogatories, or admissions showing a genuine issue exists for trial." Cifarelli v. Village of Babylon, 93 F.3d 47, 51 (2d Cir. 1996); see also Fed.R.Civ.P. 56(c), (e); Celotex, 477 U.S. at 324, 106 So. Ct. at 2553. "[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson, 477 U.S. at 249, 106 S.Ct. at 2511; see also Hayut, 352 F.3d at 743. The nonmoving party may not rely on conclusory allegations or speculation to create disputed factual issues. See D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir.), cert. denied, 524 U.S. 911, 118 S.Ct. 2075 (1998); Lipton v. Nature Co., 71 F.3d 464, 469 (2d Cir. 1995). "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2511 (citations omitted).

  II. The Timeliness of Merritt's Claims

  Spanierman Gallery argues that the counter- and cross-claims asserted by Merritt in her June 30, 2004 Amended Answers are untimely. Plaintiff contends that, under New York choice of law rules, the Massachusetts statute of limitations governs Merritt's replevin claims, and, under Massachusetts law, the claims are barred by the governing statute of limitations. Alternatively, Plaintiff argues that the claims are untimely under the limitations periods of Connecticut and New York, as well.*fn3 (See Pl.'s Mem. of Law in Support of Pl.'s Mot. for Summ. J. on Def.'s Counterclaims and Crossclaims ("Pl.'s Mem.") at 6-14; Pl.'s Statement of Material Facts ¶ 4.) Merritt rejoins that New York law governs her replevin claims, because she first demanded that Spanierman return the painting in New York (i.e., by way of asserting her counter- and cross-claims in this action on June 30, 2004), and that her claims are timely under New York's statute of limitations. (See Def.'s Mem. in Opp'n to Pl.'s Mot. for Summ. J. ("Def.'s Mem.") at 3-4.)

  A. Choice of Law

  A federal court sitting in diversity applies the choice of law rules of the forum state in which it sits, and thus, the Court applies New York's choice of law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021 (1941); Hoelzer v. City of Stamford, 933 F.2d 1131, 1135-36 (2d Cir. 1991).

  Spanierman correctly argues that, under New York's choice of law rules, "questions relating to the validity of a transfer of personal property are governed by the law of the state where the property is located at the time of the transfer." Wertheimer v. Cirker's Hayes Storage Warehouse, Inc., 2001 WL 1657237, 2001 N.Y. Slip. Op. 40445(U) (N.Y.Sup.Ct. Sept. 28, 2001) (replevin action) (citing Kunstsammlungen Zu Weimar v. Elicofon, 536 F. Supp. 829, 845-46 (E.D.N.Y. 1981) and The Greek Orthodox Patriarchate of Jerusalem v. Christie's, Inc., No. 98 Civ. 7664 (KMW), 1999 WL 673347, at *4 (S.D.N.Y. Aug. 30, 1999)); see also Wyatt v. Fulrath, 16 N.Y.2d 169, 264 N.Y.S.2d 233 (1965). Spanierman contends that the relevant transfer of title occurred in Massachusetts, where it purchased the painting, in May 1998, from Craftsman Auction, and thus, the Massachusetts statute of limitations governs Merritt's replevin claims.*fn4

  The question of which substantive law governs the replevin claims, however, differs from the question of which statute of limitations applies. In New York, "[s]tatutes of limitations are usually characterized as procedural, not substantive," and New York courts apply local procedural rules, even when applying the substantive law of another state. Wertheimer, 2001 WL 1657237 (replevin claim governed by Arizona substantive law and New York statute of limitations). "New York courts generally apply New York's statutes of limitations, even when the injury giving rise to the action occurred outside New York . . . subject to a traditional statutory exception, New York's `borrowing' statute, C.P.L.R. § 202." Stuart v. American Cyanamid Co., 158 F.3d 622, 627 (2d Cir. 1998). Under New York's "borrowing" statute, if a cause of action accrues outside of New York in favor of a non-resident, courts must apply the shorter limitations period of either the state where the cause of action accrued or New York.*fn5 See N.Y.C.P.L.R. § 202; Dugan v. Schering Corp., 86 N.Y.2d 857, 859, 635 N.Y.S.2d 164, 165 (1995); Stuart, 158 F.3d at 627; Hoelzer, 933 F.2d at 1136.

  Spanierman does not address which statute of limitations applies under New York's borrowing statute. Rather, Spanierman appears to argue that because the relevant transaction took place in Massachusetts, Merritt's replevin cause of action accrued there, and thus the Massachusetts limitations period applies. (See Pl.'s Mem. at 7.) Merritt rejoins that her cause of action accrued in New York, because she "made a demand to Spanierman Gallery — in New York, for return of the painting, which demand was refused by Spanierman Gallery in New York. Thus, New York law governs the time that Defendant Mary Merritt has to assert her counterclaims." (Def.'s Mem. at 3-4.)

  For the reasons that follow, regardless of whether the Massachusetts or New York limitations period applies, the Court concludes that Merritt's replevin claims are timely. B. Merritt's Replevin Claims are Timely

  Massachusetts and New York both have three year limitation periods for replevin claims, see, e.g., Mass. Gen. Laws ch. 260, § 2a; N.Y.C.P.L.R. § 214(3), but the accrual point for replevin claims differs between the states. In Massachusetts, replevin "claims are subject to the so-called `discovery rule,' under which a cause of action which `is based on an inherently unknowable wrong' only accrues `when the injured person knows, or in the exercise of reasonable diligence should know of the facts giving rise to the cause of action." The Republic of Turkey v. OKS Partners, 797 F. Supp. 64, 69 (D. Mass. 1992) (quoting Dinsky v. Town of Framingham, 386 Mass. 801, 803 (1982)); see also MacCleave v. Merchant, No. 010859, 2002 WL 31480307, at *2 (Mass. Super. Oct. 1, 2002) (citing Hendrickson v. Sears, 365 Mass. 83, 89-90 (1974)) ("A cause of action accrues on the happening of the event likely to put the plaintiff on notice."). Whereas, under New York law, "a cause of action for replevin against the good-faith purchaser of a stolen chattel accrues when the true owner makes demand for return of the chattel and the person in possession of the chattel refuses to return it." Solomon R. Guggenheim Foundation v. Lubell, 77 N.Y.2d 311, 317-18, 567 N.Y.S.2d 623, 626 (1991); see also Hoelzer, 933 F.2d at 1136.

  Spanierman argues that Merritt knew, or reasonably should have known, "by the end of 1999," that it had purchased the painting, because her niece, Katra Showah, saw the painting featured in a Spanierman Gallery advertisement, and within a few months of mid-September 1999, had told Merritt and Merritt's former attorney, "I know who bought the painting." (Pl.'s Mem. at 6; Deposition of Katra Showah, dated July 9, 2003 ("Showah Depo."), at 86-87, attached as Ex. H to Affidavit of Andrew B. Bittens, Esq., dated July 12, 2004 ("Bittens Aff.").) Merritt claims that she did not learn of the ...


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