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Judge Confirms Ownership of Egon Schiele Drawing

1970
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New York Law Journal 4 September 2008
By Mark Hamblett

Handing a victory to an art collector who bought a drawing by Austrian expressionist Egon Schiele from a Manhattan gallery in 1963, a federal judge has ruled there is no evidence the work was stolen by the Nazis.

Southern District Judge William Pauley determined that the 1917 drawing, "Seated Woman with Bent Left Leg (Torso)," belongs to Massachusetts art collector and philanthropist David Bakalar, who purchased it in good faith from the Galerie St. Etienne in New York.

In Bakalar v. Vavra, 05 Civ. 3037, Bakalar sought a declaratory judgment on ownership and beat back a challenge from two purported heirs to the estate of Fritz Grunbaum, an art collector and a Jewish cabaret performer in Vienna who was arrested following the 1938 Nazi annexation of Austria and died in 1941 at the Dachau concentration camp (NYLJ, Aug. 25, 2006).

Grunbaum's wife, Elizabeth, was arrested by the Nazis in 1942 and died later at a concentration camp in Minsk.

Elizabeth Grunbaum's sister, Mathilde Lukacs, and her husband, Sigmund Lukacs, fled Vienna on Aug. 12, 1938, and moved to Belgium, just after Mr. Lukacs prepared an export permit for a number of artworks, including three drawings.

Their heirs, Czech citizen Milos Vavra and New York resident Leon Fischer, counterclaimed for a declaratory judgment, conversion and replevin, charging that the drawing, created with black crayon and a water-based paint, was unlawfully taken from the Grunbaums or their estate.

They argued that the purchase of the drawing from Ms. Lukacs in 1956 by Eberhard Kornfeld, a partner at the Galerie Gutekunst & Klipstein in Bern, Switzerland, and his subsequent sale of the drawing to the Galerie St. Etienne, was illegitimate.

Bakalar, who purchased the work for $3,300 in 1963, consigned it to Sotheby's in London to sell at a 2004 auction, where it fetched the equivalent of $726,000. Sotheby's later voided the sale and told Bakalar it would hold the piece until the ownership issue was decided, according to Bloomberg News Service.

The issue for Judge Pauley was whether Bakalar validly acquired title to the drawing, with the burden on the defendants to show it was unlawfully taken.

Judge Pauley first affirmed his earlier ruling that Swiss law, and not Austrian law, applied in this situation.

"Under Swiss law, a person who acquires and takes possession of an object in good faith becomes the owner, even if the seller was not entitled or authorized to transfer ownership," he said. "A purchaser acts in good faith if he sincerely believes that the seller was authorized to transfer ownership, and the purchaser may presume from the seller's possession of the object that the seller has the authority to sell it."

With the purchaser's good faith presumed, it is up to the defendants to show the purchaser had "actual knowledge" that the seller lacked authority to sell, the judge said, or that the purchaser failed to exercise due diligence.

Under this standard, Kornfeld could presume that Ms. Lukacs owned the drawing she sold him, and with no evidence that Ms. Lukacs lacked authority, the case boiled down to Kornfeld's obligation to exercise due diligence, which, under Swiss law, requires no "general duty" to inquire into the authority to sell or the drawing's origins "unless suspicious circumstances exist," he said.

The judge took into account several factors, noting that Kornfeld had a five-year history of purchasing works from Ms. Lukacs, that "there was no evidence she was acting in unusual haste" when she sold the drawing, and that she told Kornfeld that the Schiele works were an old Viennese family possession -- a story the judge said "was plausible, given that she had lived in Austria and seemed relatively well-off."

"Even assuming that the situation somehow required Kornfeld to conduct a more comprehensive investigation into the Drawing's provenance, it would have been highly unlikely that he would have been able to conclude that the Nazis, or anyone else, had taken the Drawing from Grunbaum," the judge said, adding the heirs have not produced "any concrete evidence that the Nazis looted the drawing or that it was otherwise taken from Grunbaum."

James Janowitz of Pryor Cashman Sherman & Flynn represented Bakalar.

Janowitz said yesterday that once Judge Pauley reaffirmed that Swiss law would apply "everything fell into place."

The problem for the defense, said Janowitz, was that "they never established that Fritz Grunbaum even owned this drawing and they never established that the Nazis took possession of this drawing or any other drawing of his. A large portion of his collection showed up in Switzerland after the war and was held by his sister-in-law."

William Charron and Mona Simonian, also of Pryor Cashman, joined Janowitz in representing Bakalar.

Raymond Dowd of Dunnington, Bartholow & Miller represented Milos Vavra and Leon Fischer.

Dowd declined to comment, saying only, "We are studying our next move."

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