Case Note: California Adopts an ‘Actual’ Discovery Accrual Rule for Claims to Recover Stolen Art

International Journal of Cultural Property

Volumn 7, Issue 1, 1998, Pages 177-189

  Shapreau, Carla J ^a  

^a NONE   (United States)

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EID: 0042598328     PISSN: 09407391     EISSN: None     Source Type: Journal    
DOI: 10.1017/S0940739198770171     Document Type: Article

References (98)

1. Naftzger v. The American Numismatic Society, 42 Cal. App. 4th 421 (1996).
2. Id. at 428, n. 4.
3. Id. at 425.
4. 1982 Cal. Stat. ch. 340, § 1.
5. 1988 Cal. Stat. ch. 1186, § 1
6. 1989 Cal. Stat. ch. 467, §1.
7. The constructive discovery standard generally provides that accrual of a claim will arise when one either actually discovers or, through the use of reasonable diligence, should have discovered the whereabouts of the property or its possessor. See, e.g., O'Keeffe v. Snyder, 416 A. 2d 862, 872—73 (N.J. Sup. Ct. 1980).
8. Naftzger, 42 Cal. App. 4th 425.
9. Id. at 428, n. 4 (emphasis added).
10. Id. at 425.
11. New York applies the minority “demand and refusal” rule to claims for replevin. Guggenheim v. Lubell, 77 NY. 2d 311, 317
12. 567 N.Y.S. 2d 623 (1991).
13. Under New York's demand and refusal rule, a claim for replevin accrues when the theft victim makes a demand for return of the stolen personal property and the person in possession of the property refuses to return it. Guggenheim, 77 N.Y 2d 317.Until a demand is made and refused, a bfp's possession of stolen property is not considered wrongful under New York law. The theft victim must then prosecute the claim within New York's three-year statute of limitations for the recovery of chattel (NY Civ. Prac. L & R 214[3]). Under Guggenheim, a theft victim has no duty to notify the art world of a theft when it occurs, or thereafter, in order to defeat a statute of limitations defense.
14. Guggenheim, 77 N.Y. 2d 318, 320. However, under New York law the affirmative defense of laches may be raised by the bfp to challenge the due diligence of the theft victim. The pre-purchase due diligence of the bfp also bears scrutiny in the laches context.
15. Guggenheim, 77 N.Y. 2d 320—321.
16. See, e.g., O'Keeffe, 416 A. 2d 872—873 (cause of action for replevin did not accrue until plaintiff theft victim discovered, or reasonably should have discovered, the identity of the possessor of the stolen works)
17. Autocephalous Greek-Orthodox Church of Cyprus v. Goldberg, Feldman Fine Arts, Inc., 717 F. Supp. 1374 (S.D. Ind. 1989)
18. aff'd, 917 F. 2d 278, 289 (7th Cir. 1990) (“a plaintiff cannot be said to have ‘discovered’ his cause of action until he learns enough facts to form its basis, which must include the fact that the works are being held by another and who, or at least where, that ‘other’ is.”)
19. Erisoty v. Risik, 1995 WL 91406 (E.D. Pa. 1995) (unreported) (the parties agreed that the traditional discovery rule as set forth in O'Keeffe v. Snyder was applicable to a determination of the statute of limitations issue).
20. Naftzger, 42 Cal. App. 4th 432.
21. Id. at 432—433.
22. Id. at 434.
23. Naftzger, slip opinion, 21, and March 4, 1996 modification to Naftzger, 1996 WL 91663 (1996).
24. See, e.g., The Spoils of War (Elizabeth Simpson ed., Harry N Abrams, New York 1997)
25. William H. Honan, Treasure Hunt (Fromm International Pub. Group, New York 1997)
26. Hector Feliciano, The Lost Museum (Basic Books, New York 1997)
27. Lynn H. Nicholas, The Rape of Europa: The Fate of Europe's Treasures in the Third Reich and the Second World War (Alfred A. Knopf, New York 1995)
28. John E. Conklin, Art Crime (Praeger, Westport, CN 1994)
29. Kenneth D. Alford, The Spoils of World War II: The American Military's Role in Stealing Europe's Treasures (Carol Pub. Group, Secaucus, NJ 1994)
30. Constance Lowenthal, Justice Prevails, The Wall Street Journal, August 30, 1996
31. Quedlinburg Treasures Turn Up in Texas, IFARreports, July 1990
32. Cyprus Sues Indiana Dealer for Return of Early Christian Mosaics, IFARreports, June 1989
33. Walter V Robinson, US Tracked WWII Influx of Looted Art, Boston Globe, May 9, 1997
34. An Ignominious Legacy: Evidence Grows of Plundered Art in US, Boston Globe, April 25, 1997 (numerous other articles on this topic written by Mr. Robinson can be found on the Internet at http://www.boston.com. The keyword is “paintings”)
35. Andrew Decker, A Legacy of Shame, ARTnews, December 1984
36. Andrew Decker, Austria's Bid For Justice, ARTnews, December 1996
37. Alexandra Peers, Daniel Searle Sued Over Degas Picture Linked to Nazis, The Wall Street Journal, July 19, 1996.
38. Naftzger, Statement of Decision, 25.
39. Id. at 26.
40. Naftzger, Judgment, 9.
41. Under California law, the tort of conversion is “any act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with his rights therein.” Miller v. Rau, 216 Cal. App. 2d 68, 75 (1963).
42. “The foundation of the action of conversion rests neither in the knowledge nor the intent of the defendant. It rests upon the unwarranted interference by defendant with the dominion over the property of the plaintiff from which the injury to the latter results. Therefore, neither good nor bad faith, neither care nor negligence, neither knowledge nor ignorance are the gist of the action.” Witkin, Summary of California Law, vol. 5: Torts, § 624, 718 (9th ed., Bancroft-Whitney Co. 1988) (citations omitted).
43. Naftzger, Statement of Decision, 27.
44. Naftzger, Judgment, 9.
45. Naftzger, Statement of Decision, 28
46. quoting Naftzger, slip opinion, 21.
47. Naftzger, Statement of Decision, 28—29.
48. Naftzger, Statement of Decision, 28.
49. Under a laches theory, a claim may be barred when a plaintiff unreasonably delays in bringing an action and that delay operates to the prejudice of the defendant. In reviewing a laches defense, a court generally balances the two factors of delay and prejudice and then applies that balancing test to the facts of the case. See De Weerth v. Baldinger, 804 F. Supp. 539, 553 (S.D.N.Y. 1992)
50. rev'd on other grounds, 38 F. 3d 1266 (2d Cir. 1994). Additional factors to be considered are the underlying value of repose, the death of witnesses, faded memories, other loss of evidence, the possibility of indemnification of the bfp pursuant to Uniform Commercial Code section 2–312, and the due diligence of both parties.
51. Naftzger, Statement of Decision, 29—30.
52. See also Hendricks v. Eastman Kodak Company, 147 F. Supp. 337, 339 (S. D. Cal. 1956)
53. rev'd on other grounds, 262 F. 2d 392 (9th Cir. 1958) (“The complaint is labeled ‘replevin and the relief sought is that of the old common law remedy of replevin which, of course, is an action at law.”)
54. Fredericks v. Tracy, 98 Cal. 658, 659—60 (1893) (“replevin [claim and delivery] is an action at law for the recovery of specific personal chattels, wrongfully taken and detained, or wrongfully detained.”).
55. Some jurisdictions distinguish between “equitable” and “legal” replevin, although California, to date, is not one of them. See, e.g., Desiderio v. D'Ambrosio, 463 A. 2d 986, 988, n. 3 (N.J. Superior Ct. 1983), wherein the court stated that “[a]n equitable replevin, as distinct from a legal replevin, is an action for return of an item which has a special value apart from its intrinsic value and for which, therefore, there can be no measure of money damages. An example would be an heirloom diamond ring, valuable not for what it would bring at sale but rather for its descent within the family. Such an item is irreplaceable at any price.” The court distinguished the legal claim of replevin, which may be barred by the statute of limitations from equitable claims wherein “the issue is approached as a matter of laches.”
56. See also Skinner v. Tober Foreign Motors, Inc., 187 N.E. 2d 669 (Mass. Supr. Ct. 1963)
57. Doughty v. Sullivan, 661 A. 2d 1112, 1120 n. 6 (“Replevin is to be distinguished from equitable replevin which is a remedy to compel the ‘redelivery of property so withheld that it cannot come to be replevied.’”) (citation omitted).
58. Medeiros v. Medeiros, 177 Cal. App. 2d 69, 72 (1960).
59. Naftzger, Statement of Decision, 29.
60. The ANS is represented by John Horan and Oleg Rivkin of Fox Horan and Camerini. Naftzger is represented by Phillip A. Davis and Kathleen Ratz of Sheppard, Mullin, Richter & Hampton and Charles G. Berry of Shaw, Pittman, Potts & Trowbridge.
61. Brownrigg v. DeFrees, 196 Cal. 534, 539 (1925)
62. (citing 10 Cal. Jur. 526)
63. Bagdasarian v. Gragnon, 31 Cal. 2d 744, 752 (1948)
64. Lubin v. Lubin, 144 Cal. App. 2d 781, 793 (1956).
65. Naftzger, Statement of Decision, 29.
66. Id. at 30.
67. Guggenheim, 77 N.Y. 2d 320—321 (emphasis added).
68. See Erisoty v. Risik, 1995 WL 91406 (E.D. Pa. 1995). “The burden of proving due diligence under the [constructive] discovery rule logically rests with the original owner as the party ‘seeking the benefit of the rule to establish facts that would justify deferring the beginning of the period of limitations.’ ”
69. (quoting O'Keeffe, 416 A.2d 873).
70. Erisoty v. Rizik, 1995 WL 91406, ∗12 (E.D. Pa. 1995).
71. O'Keeffe, 416 A.2d 869 (N.J. Supr. Ct. 1980).
72. Id. at 872 (emphasis added).
73. Factors considered in determining whether the theft victim has been reasonably diligent have been touched on by some courts. See, e.g., Autocephalous Greek-Orthodox Church of Cyprus v. Goldberg & Feldman Fine Arts, Inc., 717 F. Supp. 1374, 1379—80, 1389 (S.D. Ind. 1989)
74. aff'd, 917 F. 2d 278 (7th Cir. 1990). In that case, the Republic of Cyprus immediately upon learning that the mosaics at issue were missing engaged in an organized and systematic effort to notify those that might assist them in the recovery of their mosaics, including contact with the United Nations, UNESCO, museums, museum organizations, leading Byzantine scholars and curators, and the press.
75. (The Republic's efforts “were sweeping and consistent with trade practices” [917 F. 2d, 290, emphasis added]).
76. In O'Keeffe v. Snyder, the existence of an effective method of alerting the art world of the theft at the time of the theft, or thereafter, was relevant to the issue of whether the theft victim acted diligently in discovering the necessary facts of her claim. “The [discovery] rule permits an artist who uses reasonable efforts to report, investigate, and recover a painting to preserve the rights of title and possession…. The meaning of due diligence will vary with the facts of each case, including the nature and value of the personal property” (416 A.2d 870, 872—83).
77. See also Erisoty v. Risik, 1995 WL 91406 (E.D. Pa. 1995) (theft victims were not familiar with the art world which was a factor in determination of due diligence). The value of property and other factors may also be relevant in determining what level of diligence is reasonable.
78. Guggenheim v. Lubell, 77 N.Y. 2d 320 (“The value of the property stolen, the manner in which it was stolen, and the type of institution from which it was stolen will all necessarily affect the manner in which a true owner will search for missing property”).
79. Compare Erisoty v. Risik, 1995 WL 91406 (E.D. Pa. 1995), wherein the court indicated that the bona fide purchaser would be wise to investigate as to the art work's prior ownership and the identity of the consignor, including inquiries to art or law enforcement agencies.
80. Some courts have indicated that continuous recovery efforts should be made by the theft victim. Church of Cyprus, 917 F. 2d 289 “ [A]ny ‘laziness’ this [discovery] rule might at first blush invite on the part of plaintiffs is heavily tempered by the requirement that, all the while, the plaintiff must exercise due diligence to investigate the theft and recover the works.” (emphasis added)
81. De Weerth v. Baldinger, 836 F. 2d 103 (2nd Cir. 1987) (plaintiff's failure to conduct any search for 24 years after initial theft report considered insufficient to meet due diligence standard)
82. Kunstsammlungen Zu Weimar v. Elicofon, 536 F. Supp. 829, 852 (E.D.N.Y. 1981)
83. aff'd, 678 F. 2d 1150 (2d Cir. 1982) (plaintiff's efforts to locate the stolen paintings “followed many channels” and “reflect[ed] a continuous and diligent search”).
84. In Erisoty v. Risik, 1995 WL 91406, the court found that the theft victim's efforts constituted a “continuing vigilance” in attempting to locate their paintings, although the court recognized that “one's efforts to search for a lost item would wane somewhat as the years passed. The court indicated that “it would be unusual for theft victims such as the defendants to keep in frequent contact with law enforcement officials twenty to thirty years after the fact.” One court has gone so far as to make the provocative suggestion that investigations into title should be performed by dealers as part of the sales transaction.
85. In Church of Cyprus, 917 F. 2d 294, the court stated that “dealers can (and probably should) take steps such as a formal IFAR search; a documented authenticity check by disinterested experts; a full background search of the seller and his claim of title; insurance protection and a contingency sales contract; and the like.”
86. The Society of California Pioneers v. Baker, 43 Cal. App. 4th 774 (1996).
87. Id. at 783, n. 10.
88. The court held that the 1983 amendment applies to causes of action that were still pending at the time of the amendment. Id. at 784.
89. Id. at 785—787.
90. Id. at 783, n. 9.
91. Id. at 787, n. 15.
92. Id. at 787.
93. See, e.g., Suburban Motors, Inc. v. State Farm Mut. Auto. Ins. Co., 218 Cal. App. 3d 1354, 1361 (1990)
94. Church of Cyprus v. Goldberg & Feldman Fine Arts, Inc., 717 F. Supp. 1374, 1398 (S.D. Ind. 1989)
95. affd, 917 F. 2d 278 (7th Cir. 1990)
96. Kunstsammlungen Zu Weimar v. Elicofon, 536 F. Supp. 829, 833 (E.D.N.Y. 1981)
97. affd, 678 F. 2d 1150 (2nd Cir. 1982). However, a bona fide purchaser who is required to return stolen property may have a remedy against the seller under the Uniform Commercial Code section 2–312 in force in most states, which implies a warranty of good title in the sale of goods, unless disclaimed.
98. The commercial world has begun to focus more and more on the pre-purchase due diligence of the bona fide purchaser, as shown by the product offered by Trans-Art International. This organization offers potential purchasers “certificates of due diligence” if art that is the subject of a potential purchase is untainted after an in-depth investigation into its past ownership. Investigative news reports have also focused on the issue of the bfp's pre-purchase due diligence. See, e.g., Walter V Robinson, The Art World's Spoils of War Paradox of Peace, The Boston Globe, Aug. 1, 1997, and other articles by Mr. Robinson in the Boston Globe's “Lost Art” series.