Krahmer v. Christie’s, Incorporated , (download decision from this link). This Chancery Court opinion involved the claim that a painting acquired at an auction in 1986 was not the original painting that it was represented to be and the purchaser sought a rescission. The original petition alleged intentional concealment that the work of art was not an original, but after discovery was concluded, the petitioner sought to add claims for mutual mistake of fact, negligent misrepresentation and/or constructive fraud.
The court found that the proposed new claims were barred by the applicable statute of limitations and that the proposed amendment failed to state a claim of negligent misrepresentation as a matter of law. The factual basis was a purchase in 1986 from the famed auction house, Christie’s, Inc., of a painting thought to be by Frank Weston Benson. Although Christie’s had removed its representation as to the provenance of the painting from the catalogue, after the purchase of the painting, Christie’s gave the buyers a nameplate which stated that the painting belonged to the Detroit Club of Michigan and that the Detroit Club purchased the painting directly from the artist. In the 1990s the purchasers began researching the painting and wrote to the Catalogue Raisonne’ Committee for Benson’s Paintings to have the painting listed as authentic. That committee for Benson’s Paintings is headquartered at Vose Galleries in Boston. However, it was not until the Spring of 2002 when they attempted to sell the painting at Sotheby’s Auction House that they learned about the concern that the painting was not authentic. Sotheby’s declined to accept the painting for sale and for the first time the purchasers suspected that the painting might not be a genuine work by Benson. The purchasers then contacted Christie’s and the parties agreed to have the Benson Catalogue Raisonne’s Committee determine the authenticity of the painting. On October 20, 2003 the committee opined that the painting was a fake. After learning that their painting was not a genuine work of art by Benson, the purchasers asked Christie’s to rescind the December 1986 sale. In the Christie’s catalogue, there was a conspicuous six year warranty of authenticity for the painting.
The court determined that the cause of action accrued in December of 1986 when the purchase from Christie’s was made. The parties agree that the applicable statute of limitations for negligent misrepresentation and equitable fraud under Section 8106 of Title 10 of the Delaware Code is a three year period, however, Delaware courts have carved out limited circumstances in which the running of the limitations period can be tolled based on the following doctrines: (1) fraudulent concealment; (2) inherent unknowable injuries; and (3) equitable tolling.
The court regarded Christie’s, as the auction house, as a mere intermediary between the seller who consigns the artwork and the buyer, in that the auction house is considered a fiduciary to the consignor and only owes a duty to him as opposed to the purchaser. Moreover, a buyer at an auction assumes a greater risk as to authenticity than a buyer who purchases directly from the artist. For the reasons explained in detail by the court, moreover, it determined that the deadline for filing negligent misrepresentation claims and actual fraud allegations expired in 1989. The court also determined that under New York law that there was no cognizable claim of negligent misrepresentation. This is so because under New York law the purchase of a painting and even subsequent appraisals from an auction house do not create the special relationship necessary to maintain a negligent misrepresentation claim.
Under New York law, the Delaware Chancery Court determined that the plaintiff may only recover for negligent misrepresentation where there is a fiduciary or special relationship between the parties, which was not found here. Thus, the Motion for Leave to Amend was denied but no decision was made on the initial claim in the original petition for fraud by intentional concealment.
Editor’s Note: I expect to catch up on blurbs of recent cases very soon. The Chancery Court website lists about 25 opinions for the month of June and that was a very busy month for me as well. I have the cases for that month and more recent cases summarized and I plan to post the summaries for cases not yet shown here within the next few days and/or over the weekend. Trivia: the rough average based on my memory of the usual length of the opinions is about 20 to 30 pages, and it is not uncommon for the decisions to reach 50 to 60 pages or more.