Competing claims of ownership of a painting

Federal District Court Opinions

TOLEDO MUSEUM OF ART v. ULLIN, (N.D.Ohio 12-28-2006) Toledo
Museum of Art, Plaintiff, v. Claude George Ullin, et al.,
Defendants. Case No. 3:06 CV 7031. United States District
Court, N.D. Ohio, Western Division. December 28, 2006

MEMORANDUM OPINION AND ORDER

JACK ZOUHARY, District Judge

INTRODUCTION

This case involves competing claims of ownership of a
painting by Paul Gauguin entitled “Street Scene in Tahiti”
(the Painting). Plaintiff, the Toledo Museum of Art (TMA),
has had continuous ownership of the Painting since 1939.
Defendants are the heirs of Martha Nathan, a prior owner of
the Painting. Martha Nathan was a Jewish woman born in
Germany who sold the Painting in 1938 to a group of
European art dealers who in turn sold the Painting in 1939
to TMA.

TMA has moved to dismiss Defendants’ claim of ownership
alleging the claim is barred by Ohio’s four-year statute of
limitations governing conversion of personal property.
Defendants allege that (1) this lawsuit does not sound in
conversion but rather is a declaratory judgment action
which is not barred by the statute of limitations (or
laches) and (2) TMA voluntarily waived its statute of
limitations defense.

This Court has jurisdiction pursuant to 28 U.S.C. §
1332, as there is complete diversity of citizenship and the
amount in controversy exceeds $75,000, exclusive of
interest and costs. This Court also has authority to grant
declaratory judgment, as requested by both parties,
pursuant to Page 2 28 U.S.C. §§ 2201(a) and
2202. In determining the propriety of a declaratory
judgment, this Court considers the five factors set forth
in Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6th
Cir. 2000):

1. whether the judgment would settle the controversy;

2. whether the declaratory judgment action would serve a
useful purpose in clarifying the legal relations at issue;

3. whether the declaratory remedy is being used merely for
the purpose of “procedural fencing” or “to provide an arena
for a race for res judicata;”

4. whether the use of a declaratory action would increase
the friction between our federal and state courts and
improperly encroach on state jurisdiction; and

5. whether there is an alternative remedy that is better or
more effective.

This case satisfies each of the five factors. A declaratory
judgment will settle the controversy of ownership of the
Painting and clarify the legal rights of the parties. There
is no indication this proceeding is being used for ulterior
purposes, will increase friction between federal and state
courts, or bypasses a more effective remedy. Therefore, a
declaratory judgment is appropriate.

MOTION TO DISMISS STANDARD

When deciding a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), the function of the Court is to
test the legal sufficiency of the claims. The Court is
required to accept the allegations stated in the pleading
as true, Hishon v. King & Spalding, 467 U.S. 69, 73 (1984),
and take the alleged facts in the light most favorable to
the claimant. Christopher v. Harbury, 536 U.S. 403, 406
(2002); Westlake v. Lucas, 537 F.2d 857, 858 (6th Cir.
1976). In considering a motion to dismiss the Court may
consider “materials in addition to the complaint if such
materials are public records or are otherwise appropriate
for the taking of judicial notice.” New England Health Care
Employees Pension Fund v. Ernst & Young, LLP, 336 F.3d 495,
501 (6th Cir. 2003). The Court is without authority to
dismiss the claims unless it can be demonstrated beyond a
doubt that Defendants can Page 3 prove no set of facts
that would entitle it to relief. Conley v. Gibson, 355 U.S.
41, 45-46 (1957); Westlake, 537 F.2d at 858.

BACKGROUND FACTS

History of the Painting

Martha Nathan was the wife of a prominent art collector,
Hugo Nathan. She inherited the Painting and numerous other
artworks upon her husband’s death in 1922. In his Will,
Hugo Nathan indicated his intention that Martha Nathan
would someday sell some of these artworks to meet her
needs.

In February 1937, Martha Nathan left Germany in order to
escape Nazi persecution. She moved to Paris, France where
she obtained French citizenship. Around May 1938, she
returned to Germany to sell her house. At that time, the
Nazi government required her to turn over six paintings
remaining in her home to the Staedel Art Institute. The
paintings she turned over did not include the Painting
which she had moved sometime earlier along with other
artwork to Basel, Switzerland. She also transported some
household goods from Germany to France where she placed them
in storage. (These household goods remained in storage
until they were later confiscated by the Nazi regime in
June 1942.) Martha Nathan moved permanently to Switzerland
around 1939.

In December 1938, a year and a half after living in France
and before the German occupation of France, Martha Nathan
sold some of her artwork, including the Painting then
located in Basel, Switzerland. She sold the Painting to
three prominent European art dealers, at least two of whom
had known her for many years.[fn1] These two, Justin
Thannhauser and Alexander Ball, were German Jews Page 4
whose families owned art galleries in Germany until their
galleries were liquidated by the Nazi government. They,
like Martha Nathan, left Germany to escape Nazi
persecution. The third art dealer, George Wildenstein, also
was Jewish but not German. In December 1938, the three
purchased the Painting from Martha Nathan for 30,000 Swiss
Francs (approximately U.S. $6,900).

In short, this sale occurred outside Germany by and between
private individuals who were familiar with each other. The
Painting was not confiscated or looted by the Nazis; the
sale was not at the direction of, nor did the proceeds
benefit, the Nazi regime. Several months later, in May
1939, TMA purchased the Painting from Wildenstein & Co. for
U.S. $25,000. TMA has had the Painting on display in Ohio
and internationally since 1939 with Martha Nathan noted as
prior owner.

Following World War II and the fall of the Nazi regime,
Martha Nathan pursued claims for her wartime losses that
resulted from Nazi persecution including the exit tax she
paid, the sale of her home for less than its fair market
value, the six paintings she turned over to the Staedel Art
Institute and the household items she left in storage in
France. Martha Nathan continued to live in Switzerland
until she died in 1958 at the age of eighty-three. Her
brother, Willy Dreyfus, was Co-Executor of her estate until
his death in 1977.

Nathan Family Pursues Nazi-Era Claims

Martha Nathan and later her estate successfully pursued
restitution and damages for wartime losses that resulted
from Nazi persecution. Willy Dreyfus also actively pursued
compensation for his family’s wartime losses and even filed
a civil action in U.S. Federal Court in 1973 to obtain
further compensation for his interest in the family’s
German banking firm which allegedly was sold in 1938 under
duress for below its actual value. Dreyfus v. Von Finck,
534 F.2d 24 (2nd Cir. 1976), cert. denied 429 U.S. 835
(1976). Page 5

In 1999, the American Association of Museums adopted the
Guidelines Concerning the Unlawful Appropriation of Objects
During the Nazi Era (the “Guidelines) (Pl.’s Mot., Ex. B).
Pursuant to the Guidelines, TMA posted on its website
artwork having a Nazi-era provenance.

Defendants contacted TMA about the Painting in May 2004 and
asserted a claim of ownership. TMA provided Defendants with
the information it had collected about the Painting’s
provenance and, in 2005, TMA rejected Defendants’ claims of
ownership. TMA brought this quiet title action in January
2006, seeking a declaratory judgment and a permanent
injunction against legal or other actions brought by
Defendants regarding the Painting. Defendants bring
counterclaims for conversion, restitution and a declaratory
judgment.

The distant heirs of Martha Nathan now demand possession of
the Painting or compensation for their claimed loss. TMA
argues that no claim of ownership was asserted to the
Painting for more than sixty-six years during which time
any relevant statute of limitations has long run.
Specifically, TMA asserts Defendants’ claim of ownership is
barred by the Ohio four-year statute of limitations.

CHOICE OF LAW

Ohio’s choice of law rules determine what law governs this
action. “[A] federal court sitting in diversity must apply
the choice of law rules of the state in which it sits.”
Charash v. Oberlin College, 14 F.3d 291, 296 (6th Cir.
1994) (citing Klaxon Co. v. Stentor Electric Mfg. Co., 313
U.S. 487, 496 (1941)). Under Ohio’s choice of law rules,
the Ohio statute of limitation applies to this case. A
federal court sitting in Ohio applies the procedural law of
the forum state including the forum’s statute of
limitations even if the case requires application of
another state’s substantive law. Charash, 14 F.3d at 299
(citing Howard v. Allen, 30 Ohio St. 2d 130, 133 (1972));
Metz v. Unizan Bank, 416 F. Supp. 2d 568, 573-74 (N.D. Ohio
2006). Page 6

DECLARATORY RELIEF IS APPROPRIATE

Statute of Limitations Bars Defendants’ Recovery

TMA has moved to dismiss Defendants’ Counterclaim.
Defendants allege three separate causes of action:
declaratory relief, restitution and conversion. “Actions
for declaratory judgment are neither legal nor equitable
claims, but are considered to be sui generis” and “must
accompany the substantive claim for which the declaratory
judgment is sought.” QSI-Fostoria DC, LLC v. General
Electric Capital Business Asset Funding Corp., No. 3:02 CV
7466, 2005 WL 81902, at n. 3 (N.D. Ohio 2005). The Sixth
Circuit has held that “[b]ecause a declaratory judgment
action is a procedural device used to vindicate substantive
rights, it is time-barred only if relief on a direct claim
would also be barred.” International Ass’n of Machinists
and Aerospace Workers v. Tennessee Valley Authority, 108
F.3d 658, 668 (6th Cir. 1997). Under this analysis,
Defendants’ request for declaratory relief is barred if the
underlying substantive claims for restitution and
conversion are barred by the statute of limitations.

Defendants argue that this result is inequitable if TMA’s
request for declaratory judgment is not similarly barred.
The Court disagrees. TMA’s request for declaratory relief
is barred only if its underlying claim to quiet title is
barred. However, Ohio law does not impose a statute of
limitations or laches defense to quiet title actions where
plaintiff is in posession. Chambers v. Wilcox, 15 Ohio Dec.
629, 632 (Ohio Com. Pl. 1905) (an action to quiet title is
a “special proceeding whose object is to challenge and
provoke any causes of action which may exist” and, when
this is the petition’s sole purpose, no statute of
limitations applies); Klar v. Hoopingarner, 62 Ohio App.
102, 106 (1939) (defense of laches is not available against
the party in possession). Because the underlying claim in
TMA’s request for a declaratory judgment is not barred, its
Complaint for Declaratory Judgment is likewise not barred.
Page 7

The underlying claims in Defendants’ request for
declaratory judgment are restitution and conversion, each
governed by Ohio Revised Code § 2305.09(B). This
statute requires actions “for the recovery of personal
property” be brought within four years after the cause of
action accrues.[fn2]

Claims for the recovery of personal property accrue when
“the wrongdoer is discovered.” Investors REIT One v.
Jacobs, 46 Ohio St. 3d 176, 180 (1989). Under this
“discovery rule,” claims accrue when the claimant
“discovers or, in the exercise of reasonable care, should
have discovered the complained-of injury.” Id. at 181;
Hambleton v. R.G. Barry Corp., 12 Ohio St. 3d 179, 181
(1984) (“If a person has knowledge of such facts as would
lead a fair and prudent man, using ordinary care and
thoughtfulness, to make further inquiry, and he fails to do
so, he is chargeable with knowledge which by ordinary
diligence he would have acquired”) (citation omitted);
Copeland v. Delvaux, 89 Ohio App. 3d 1, 6 (1993)
(“Information sufficient to alert a reasonable person to
the possibility of wrongdoing gives rise to a party’s duty
to inquire into the matter with due diligence”) (citation
omitted).

In the instant case, Martha Nathan pursued restitution and
damages immediately after the war for property she lost as
a result of Nazi persecution, but did not file a claim for
the Painting. If she believed she had a claim to the
Painting, she could have investigated and brought suit back
then. Up to her death in 1958, twenty years after the
alleged sale, she did not challenge the art dealers’
purchase or the subsequent sale to TMA. TMA did not try to
hide its possession of the Painting and Martha Nathan knew
better than anyone the facts surrounding her own purported
sale. The Painting was Page 8 acquired from her by
acquaintances who, like her, were Jews who suffered during
Nazi-era Germany. Any fraud, duress or wrongdoing would or
should have been known at the time the art dealers’
acquired the painting.[fn3] Even if, for some unexplained
reason, she could not discover any wrongdoing at that time,
once the chaos of World War II Europe subsided, a
reasonable and prudent person would have made further
inquiry into the terms of her sale to the art dealers.
Defendants, heirs to the Nathan estate, are imputed with
knowledge of her interest. Schwartz v. Cincinnati Museum
Ass’n, 35 Fed. Appx. 128, 131 (6th Cir. 2002).

Even if Defendants were not imputed with Martha Nathan’s
knowledge, they too should have made inquiry into the
Painting’s provenance well before 2002. Martha Nathan
passed away in 1958, at which time an accounting of her
estate was made and additional Holocaust-related claims
were made by her Executor (Compl. § 65.3).
Defendants themselves cite to the numerous Congressional
hearings held on the issues of Nazi-era artworks beginning
in 1998 (Defs’ Opp. 4). At the very latest, sixty years
after the sale of the Painting, the public debate
surrounding Nazi-era assets should have led the Nathan
heirs to inquire into the location of her former assets.
Based upon Martha Nathan’s own previous claims, as well as
those of her estate, the heirs knew she was persecuted by
the Nazis and sustained wartime losses. This knowledge
would have led a reasonable person to make further
inquiries. These inquiries and ordinary diligence would
have revealed the sale of the Painting in 1938. Certainly
by 1998, at the latest, Defendants had sufficient notice to
alert them to the possibility of wrongdoing surrounding the
Painting. Page 9

At least one other court has made a similar finding. In
Adler v. Taylor, No. CV 04-8472-RGK, 2005 WL 4658511, at *4
(C.D. Cal. 2005), the plaintiffs lost a painting due to
Nazi persecution and the painting was subsequently
purchased by the defendant in 1963. The court held
California’s three-year statute of limitations would begin
to run when the defendant acquired the property, or when,
applying the discovery rule, “by exercise of reasonable
diligence” the plaintiffs should have discovered the facts
forming the basis of their cause of action. Id. In applying
the discovery rule, the court considered three “key facts:”
(1) the world knew plaintiffs had once owned the painting;
(2) plaintiffs knew the painting was lost or stolen; (3)
defendant’s purchase and ownership was public knowledge and
easily discoverable. Id. The court concluded that with
reasonable diligence, the plaintiffs would have discovered
their claim in 1963 when the painting was sold to
defendant.

Similarly, Defendants here knew or should have known Martha
Nathan had once owned the Painting, a fact publicized by
both TMA and the art dealers; Defendants knew the Painting
was no longer in the family’s possession for some time; and
TMA’s ownership and possession was public knowledge and
easily discoverable. As in Adler, by exercise of reasonable
diligence, Martha Nathan would have known she had a claim
against TMA shortly after the sale to TMA in 1939. The
undisputed fact that she, and later her estate, did file
claims for Nazi-era losses, but did not pursue recovery of
the Painting is strong evidence that the purchase by TMA
was not considered suspect.

Based upon the dates alleged in Defendants’ Answer, no
matter what date is selected, whether 1938 when the
Painting was sold by Martha Nathan, 1939 when TMA purchased
the Painting, 1958 when Martha Nathan died and her estate
was opened, or at the very latest, 1998 when Congress began
to discuss the issue in a highly publicized forum,
Defendants’ claims are time barred well before their filing
in 2006. These undisputed facts and dates create an
insurmountable bar to relief. Page 10

TMA Did Not Waive Its Defenses

Defendants’ primary argument is that TMA voluntarily
relinquished its statute of limitations and laches defenses.
This waiver claim is based upon the American Association of
Museum Guidelines which were adopted to assist museums in
addressing issues raised by holding Nazi-era artworks in
their collections. The Guidelines were meant to address
unlawful appropriation of cultural objects during the
Nazi-era without restitution. Pursuant to the Guidelines,
TMA posted the Painting on its website. As a result,
Defendants contacted TMA regarding the Painting in May
2004. Thereafter, TMA investigated the provenance of the
Painting and concluded that Defendants’ claim to the
Painting was without merit. Defendants were informed of
this decision in July 2005 when their claim was rejected.

Defendants claim the adoption of the Guidelines waived
TMA’s defense of the statute of limitations, and that the
critical time for computing the statute of limitations is
July 2005 when TMA rejected Defendants’ claim or, at the
earliest, when Defendants first contacted TMA about the
Painting back in May 2004. Either date is well within the
four-year limitations period of Ohio Revised Code §
2305.09.

Defendants’ position is that the act of posting artwork,
including this Painting, on the TMA website was a general
invitation to the public to come forward, make a claim, and
collect damages. The Court rejects this argument. Under Ohio
law, a waiver is a “voluntary relinquishment of a known
right, with the intent to do so.” City of N. Olmsted v.
Eliza Jennings, Inc., 91 Ohio App. 3d 173, 180 (1993).
Defendants must prove a waiver based on “clear,
unequivocal, decisive act by the other party.” Id. at 180.
The Guidelines were not intended to create legal
obligations or mandatory rules but rather were intended to
“facilitate the ability of museums to act ethically and
legally as stewards” through “serious efforts” on a “case
by case basis” (Pl.’s Mot., Ex. B, at General Principles,
Acquisitions). The Guidelines are “intended to assist
museums in addressing issues relating to objects Page 11
that may have been unlawfully appropriated during the Nazi
era,” but should not be interpreted to place an undue
burden on the museums (Id.). Pursuant to the Guidelines,
TMA carried out research which it shared with Defendants.
The posting of Nazi-era artwork by TMA was not an automatic
waiver, and TMA did not “elect” to waive its defenses which
the Guidelines specifically provide it “may” do if and when
presented with a meritorious claim (Pl.’s Mot., Ex. B, at
Claims of Ownership). Indeed, instead of waiving these
defenses, TMA filed this lawsuit specifically asserting
these defenses. Therefore, even accepting all factual
allegations in Defendants’ pleading as true, the Court
finds there has been no voluntary and intentional
relinquishment of these defenses by TMA.

CONCLUSION

Based on the foregoing, Defendants can prove no set of
facts that entitle them to relief. Their claims were not
brought within the applicable statute of limitations.
Therefore, Plaintiff’s Motion to Dismiss (Doc. No. 29) is
granted and, pursuant to Federal Civil Rule 12(b)(6), the
Counterclaims are dismissed with prejudice for failure to
state a claim.

IT IS SO ORDERED.

[fn1] Defendants refuse to acknowledge a “sale,” citing the
lack of evidence as to negotiation, offer and acceptance,
bill of sale, or exchange of consideration, or in the
alternative the unconscionability of purchase price (Answer
§ 1d). Whether a “sale” occurred is immaterial to
the current analysis. Even without a prior “sale,” there is
no dispute that TMA acquired ownership through an arms
length purchase from established art dealers.

[fn2] The Court acknowledges the strong public policy to
resolve claims for Nazi-era artwork. However, unlike some
states, Ohio law does not contain a special statute of
limitations for Nazi-era artwork. See Cal. Civ. Proc. Code
§ 354.3 (granting heirs the right to sue galleries
and museums for the return of Nazi-era artwork until 2010).
This Court does not sit as a “super-legislature” to rewrite
state laws. Evans v. Abney, 396 U.S. 435, 447 (1970)
(federal courts’ responsibility “is to construe and enforce
the Constitution and laws of the land as they are and not
to legislate social policy on the basis of our own personal
inclinations”); Watson v. Kenlick Coal Co., Inc., 498 F.2d
1183, 1187 (6th Cir. 1974).

[fn3] See Firsdon v. Mid-American National Bank & Trust Co.,
No. 90WD083, 1991 WL 254218, at *4 (Oct. 11, 1991). In
Firsdon, the defendant, a grain farmer, was contractually
obligated to give his landlord half of his grain crop or
half of the proceeds from its sale. Id. at *2. Defendant
rightfully raised the grain, stored it, and then sold it.
Id. However, the proceeds wrongfully went to two other
creditors, not the landlord, and the landlord filed claims
against defendant seven months later. Id. The court held
the landlord discovered or should have discovered the
conversion at the time of the sale even though he was not a
party to the sale. Id. at 4. Here, Martha Nathan was
herself a party to the sale making even stronger the
application of the limitations. Page 1