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$6.64 Million Judgment: Halsey Minor Case Provides Inside Look at Sotheby&#146s Deals

HicksEsme.jpg
Edward Hicks, “The Peaceable Kingdom with the Leopard of Serenity,”
1846-48

Photo: Sotheby’s

Hassam1.jpg
Childe Hassam, “Paris, Winter Day” (aka “Carriage in Winter”), 1887
Photo: Sotheby’s

[See UPDATE here.]

I love perusing art-related court decisions, because they sometimes impart a rare look into convoluted dealings that are otherwise kept secret.

CultureGrrl readers may remember the tangled tale of an Edward Hicks “Peaceable Kingdom” (top), owned by the financially beleaguered jeweler Ralph Esmerian, that Sotheby’s first tried to sell privately and then offered at auction. Thanks to last week’s decision in a lawsuit regarding that painting, we now have a courtside look at the inside story.

As reported [via] on the Law 360 website for business-law aficionados, Judge Barbara Jones of U.S. District Court, Southern District of New York, last week ruled in favor of Sotheby’s in the auction house’s suit [08-cv-7694] seeking payment for three artworks for which CNET‘s founder, Halsey Minor, had been the successful
bidder—the Hicks, a Hassam (above) and a less pricey work on paper by Warhol (below).

While Law 360’s headline states that Minor owes Sotheby’s $4.4 million under the judgment, Hilary Russ‘ article correctly states that interest, late charges and legal fees would be added to that. The court’s Mar. 31 Amended Judgment puts the grand total at $6.64 million.

The judge rejected Minor’s legal arguments, including his assertion that the auction house’s collateral interest in the Hicks and Hassam was equivalent to an “ownership interest,” which the auction house customarily discloses in the catalogue with a triangular symbol. According to the court decision, the Hicks was one of 300 items that Esmerian had pledged as collateral for a $11.57-million loan from Sotheby’s; the Hassam was one of 50 works pledged as collateral for the auction house’s $5.85-miillion loan to the Gilbert A. Harrison Trust. In both cases, the loans were not repaid, leading to those two works’ being offered for sale by Sotheby’s.

The court’s 43-page Judgment provides a fascinating look at the arrangements between Sotheby’s and the consignors for these two paintings—particularly the Hicks, which Esmerian had previously promised to the American Folk Art Museum, New York. (The painting was included in the museum’s 2001 catalogue, “American Radiance: The Ralph Esmerian Gift to the American Folk Art
Museum.”)

The Hicks was first offered privately (not at auction) through Sotheby’s. Although Sotheby’s had previously refused to disclose the minimum bid, Judge Jones’ decision now reveals it—a whopping $10 million, arrived at in an agreement negotiated among Sotheby’s, Esmerian and the American Folk Art Museum. There were no takers at that price, whereupon, pursuant to the negotiated agreement, the painting was offered for auction on May 22, 2008, with a presale estimate of $6-8 million. Minor’s winning bid was $8.6 million (for a total of $9.67 million, with the buyer’s premium).

The Hassam was estimated to bring a hammer price of $2.5-3.5 million and was knocked down to Minor at $3.5 million ($3.96 million with premium). That painting was called “Paris, Winter Day” in the catalogue
entry
, but Dara Mitchell, Sotheby’s director of American paintings, drawings and sculpture, confirmed to me that this was the same painting identified in the lawsuit as “Carriage in Winter.” (The higher total price reported on the online catalogue entry is in error; the list of postsale highlights reports the same $3.96-million price that appears in the court decision.)

The Warhol (over which there was no court dispute about Minor’s obligation to pay) went for $301,000, including premium (estimate: $100,000-150,000):

WarhDust1.jpg
Andy Warhol, “Diamond Dust Shoes,” 1980
Photo: Sotheby’s

After Minor reneged, Sotheby’s sold the Hicks privately for $7 million in
February of this year, the court decision reveals. It auctioned the Hassam on May 21, 2009 for $2.32 million, and the Warhol on May 15, 2009 for $218,500—all substantially less than Minor’s bids-plus-premium of $9.67 million, $3.96 million and $301,000, respectively. These lower prices may reflect the decline of the art market between May 2008 and the times of the later sales, as well as the fact that these works may have been “burned” by their dicey market history.

The $6.64 million that the court awarded to Sotheby’s equals the difference between what Minor should have paid and the lesser amounts that the works ultimately sold for, plus late charges and interest. Additional interest will accrue until the date of actual payment.

Minor can appeal the decision. I have a query pending with his lawyers, asking whether he intends to do so. (I’ll update here if and when I receive an answer.)

The above-linked Law 360 post also mentions another lawsuit (still pending) between Minor and Christie’s; Lindsay Pollock of Bloomberg reports on a yet another Minor lawsuit between him and another creditor—ML Private Finance, an affiliate of Merrill Lynch. According to Pollock, that case resulted in a “court judgment [against Minor] for $21.6 million.”

Speaking of payments owed, my warm thanks go out to CultureGrrl Donor 125 from Forest Hills, NY, who said he hit my “Donate” button in appreciation of yesterday’s Cleveland post. If you found today’s report (or some other one) interesting, please tell me with a click.

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