Order of Business At Auction, Red Flag or Paddle?

Steven Brooks, a collector of Old Masters, says that a painting he bought from Sotheby’s for £57,600 in 2004 (about $90,000 today) is worthless because it was once owned by the war criminal Hermann Goering, and might have been looted by the Nazis.  The painting, Allegorical Portrait of a Lady as Diana Wounded by Cupid, is by the 18th-century French artist, Louis-Michel van Loo. The Goering connection came to light in 2010, when Brooks sought to sell the painting at Christie’s. When Christie’s specialists discovered that Goering had bought the work in 1939, Christie’s refused to accept it for auction, citing concerns about being able to convey good title.

In a complaint filed against Sotheby’s in California on March 21, Brooks alleges that Sotheby’s should have researched the provenance and informed potential buyers that the work had been owned by Goering; that the Goering connection creates “a cloud on title” that renders the painting unsalable and without value; and that Sotheby’s refuses either to put it up for auction or refund his money.

The case is unusual in many respects.  First, it is standard practice for auction catalogues to contain Conditions of Sale, Terms of Guarantee, and Glossaries of Terms.  A typical* Sotheby’s catalogue from 2001 states, under Conditions of Sale:
The following Conditions of Sale and Terms of Guarantee are Sotheby’s, Inc. and the Consignor’s entire agreement with the purchaser relative to the property listed in this catalogue…

By participating in any sale, you acknowledge that you are bound by these terms and conditions.
      1.     [A]ll property is sold “AS IS” without any representations or warranties by us or the Consignor as to merchantability, fitness for a particular purpose, the correctness of the catalogue or other description of the…provenance…of any property…and no statement anywhere, whether oral or written,…shall be deemed such a warranty, representation or assumption of liability.

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