A Chaotic Palette: Conflict of Laws in Litigation between Original Owners and Good-Faith Purchasers of Stolen Art

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ABSTRACT

The 1990s saw an exponential growth in the number and political sensitivities of claims by original owners of stolen art against good-faith purchasers of that art. These cases have challenged courts, threatened international relations, created public relations nightmares for museums, and generally shaken the art world. In defining whose claim should prevail as between original owners and good-faith purchasers, states and nations have adopted significantly varied rules to reach divergent resolutions of complicated issues of public policy and private right. In the relatively rare case in which the original owner/good-faith purchaser dispute is connected with a single state or nation, the application of that sovereign's chosen rules presumably furthers the sovereign's interest. When, as is much more often the case, the journey of the art and the domicile of the claimants link the dispute to more than one state or nation, the multijurisdictional character of the case may substantially complicate the issue of ownership. When implicated jurisdictions have been driven by different policy preferences to adopt different ownership rules, the result on a micro-level will be a choice of law that may well further a single state or nation's interest. The result on a macro-level is virtually certain to undermine all relevant policy aspirations. This Article explores the cause and effect of this universally unattractive result.

INTRODUCTION

Egon Schiele paintings on loan from an Austrian museum to New York's Museum of Modern Art are seized, first by state officials and later by federal officials, after heirs of the original owners claim that the paintings were stolen by the Nazis.(1) An ancient manuscript containing tenth-century copies of formulations of Archimedes, long in the possession of a French family and consigned for auction at Christie's in New York, is claimed by a Middle Eastern monastery.(2) A fifteenth-century portrait, stolen from a castle in Germany by an American soldier and sold to a private citizen on Long Island, is claimed by a German museum.(3) Sixth-century mosaics, stripped from the walls of a church in northern Cyprus, are sold in Switzerland to an Indiana gallery owner who offers them for sale in Indiana, where the Cypriot government and the church discover and reclaim them.(4) Paintings stolen from a Washington, D.C., family lie in pieces in a garbage bag in a Pennsylvania house before they are bought by a Pennsylvanian and later reclaimed by the family.(5) The son of a Czech painter seeks the return of one of his father's paintings from an Illinois art dealer working "out of a shopping bag," who had purchased it from "Fly-by-Nite Galleries," which had in turn purchased it from a hot tub dealer, who had seen it while buying fixtures from a defunct Chicago art gallery.(6)

From the tragic to the ridiculous, these cases have challenged courts,(7) threatened international relations,(8) created public relations nightmares for museums,(9) and generally shaken the art world.(10) Although the seizures of the Schiele works from the Museum of Modern Art (MoMA) garnered the most international and domestic attention,(11) they reflect only one of many disputes between heirs of original owners and museums over artwork claimed to have been stolen by the Nazis and their sympathizers. A lawsuit filed against the Seattle Art Museum and later settled,(12) as well as claims against the Fogg Art Museum at Harvard, the Museum of Fine Arts in Boston, the Minneapolis Institute of Arts, Vienna's Art History Museum, and numerous museums in the former Soviet bloc,(13) present many of the same ownership tensions as are presented by the claimants to the Schiele paintings. The claims are being brought not only against museums but also against private collectors.(14)

Despite a 1987 prediction by the United States Court of Appeals for the Second Circuit that legal issues presented by efforts of original owners to recover stolen art from good-faith purchasers, although interesting, would not appear frequently,(15) the last decade has seen a sharp increase in cases raising these issues, and every indication at the beginning of a new century is that the number and complexity of original owner versus good-faith purchaser disputes over stolen art will increase.(16) As the seizure of the Schieles at MoMA suggests, provenance(17) issues will not solely be the subject of private lawsuits between owners and good-faith purchasers but will also strain relations between museums and, ultimately, between nations.(18)

Although theft by the Nazis has captured the most recent attention, American and Russian soldiers apparently stole significant works as well.(19) Of course, with the escalation of art prices, art is most often stolen in far less controversial circumstances. In fact, among the thefts described in the pages that follow are ones committed by common thieves, business associates, trusted advisors, friends, and in-laws.

Neither common law nor, with rare exception,(20) statutory law has "given works of art the distinction of a body of jurisprudence all its own."(21) Rather, in most states and nations, the laws that govern title issues with respect to art are those generally applicable to commercial transactions in any moveable property.(22) There are no statutory mechanisms for registering or recording title to works of art(23) such as exist for land or automobiles. Even so, monies paid to acquire art routinely rival the costs of automobiles and in many cases exceed tenfold even the priciest real estate.(24) It is precisely these prices that make art an increasingly attractive target for thieves.

One central feature characterizes disputes arising out of stolen art, whatever the motive for the original theft. The disputes are between two relative innocents: the original owner from whom the art was wrongfully taken or withheld and a person or entity who is, or at least claims the status of, a good-faith purchaser. Such a juxtaposition is one that renders it "impossible for the law to mete out exact justice."(25) The determination of which of the two prevails--owner or good-faith purchaser--raises complicated issues of public policy as well as of private rights. As this Article later details, states and nations have chosen widely different rules to define these rights and prioritize these policy goals.

In the relatively rare case in which the original owner/good-faith purchaser dispute is connected with a single state or nation, the application of that sovereign's chosen rule, whomever it favors, presumably furthers the sovereign's interests. When, as is much more often the case, the journey of the art and the domicile of the claimants link the dispute to more than one state or nation, the multijurisdictional character of the case may substantially complicate the issue of ownership.(26) If the connected jurisdictions have been driven by different policy preferences to adopt different ownership rules, the result on a micro-level will be a choice of law that may well further a single state or nation's interest. The result on a macro-level, however, is virtually certain to undermine all relevant policy aspirations.

To explore the cause and effect of this universally unattractive result and suggest the proper method for its avoidance, this Article proceeds in four parts. Part I describes the substantive and procedural rules adopted by individual states and nations to define the relative rights of original owners and good-faith purchasers. Part II defines the way in which United States and European courts decide choice-of-law issues involving these rules when, because of multijurisdictional contacts of the artwork or the parties, multiple rules are available. Part III examines the consequences of the choice-of-law outcomes for the parties, the policies, the art world, the international exchange of art, the public, and international relations. Part IV offers observations regarding rules that may further the individual and collective interests of these polities and policies.

Having detailed what this Article will address, it is appropriate to devote a few words to what it will not address. The Nazi context of the most widely publicized of these cases poses unique and difficult issues with which claimants, organizations, museums, and governments are now just beginning to grapple.(27) Until a domestic or international consensus is reached as to if and how Nazi-tainted thefts are to be treated differently than other thefts, however, Nazi-tainted art ownership disputes will be decided by application of the same legal rules and subject to the same chaos as surrounds routine art theft cases.(28) This Article leaves to others the issue of whether Nazi-tainted cases should be subjected to different rules.(29)

Additionally, although original owner versus good-faith purchaser disputes have arisen outside the United States, particularly in Europe,(30) the major focus of this Article is on the United States. The increase in disputes centered in the United States is grounded on three factors: one economic, one cultural, and one legal. First, often art follows wealth. Thus, in the post-World War II era, art came here.(31) American museums, auction houses, and collectors were hungry to acquire European works. As a result, they now find themselves vulnerable. Second, Americans may desire to acquire foreign art out of a strong sense of ancestral connection.(32) Third, American courts are often "the claimant's battleground of choice."(33) As will become clear as this Article proceeds, certain American states, most notably New York, have adopted rules that substantially, and quite intentionally, favor the original owners.(34) In Europe, on the other hand, a buyer of stolen goods often is required to prove only that he bought an object in good faith.(35) Of course, as any good transnational lawyer knows, mere suit in an American court should not and does not automatically trigger the application of American rules.(36) The available rules regarding rights to stolen art from which an American court might choose, the mechanisms for making the choice among those rules, and the consequences of that choice are issues to which we turn in the next sections of this Article.

I. RIGHT-DEFINING RULES

When art is stolen, there is no question that the thief has committed, and the owner has suffered, a legal wrong. When stolen art finds its way into the hands of a good-faith buyer, one who has paid substantial value for the art, that buyer is the innocent victim of a chain of possession that began and remained wrongful. When the original owner finally locates the stolen art in the possession of the good-faith purchaser, the sympathy which each may have for the innocence of the other rarely translates into recognition of the superior legal right of the other. The demand for possession by the original owner, the refusal of that demand by the good-faith purchaser, and the litigation that often follows have provided the setting for the development of virtually the entire body of law defining the rights of claimants to stolen or misappropriated art.(37) The litigation vehicle for determination of these rights in American courts is an action for either conversion(38) or replevin.(39) Replevin is an action at law, normally treated as sounding in tort,(40) through which the owner seeks to recover personal property.(41) Of the two, replevin is the cause favored by owners,(42) although occasionally the owner sells the art immediately after recovering it.(43)

Historically, an action in replevin allowed the contested property to be taken from the defendant's possession and placed in the plaintiff's possession prior to the trial. This was the central advantage of the action. The nature of this procedural right led to replevin's characterization as a "local" action and, thus, to the conclusion that the action could be brought only in the jurisdiction in which the property was located.(44) Today, an action in replevin has taken on broader purposes and varied names. Most states differentiate between an action in which the plaintiff seeks possession of the property but is content to wait until adjudication of the parties' rights and that in which the plaintiff seeks a pretrial seizure of the property.(45)

The key difference between the two avenues for recovery of a chattel, for purposes of this Article, lies in the nature of each as in personam or in rem. Where an action is brought simply to recover a chattel, the action is in personam, that is, the court's jurisdiction is based on the presence or contacts of the defendant. An order of seizure, on the other hand, operates directly on the chattel and may be brought only in the jurisdiction in which the chattel is situated.(46) Thus, the plaintiff may make strategic decisions, including those aimed at choice of a particular law, by having the opportunity to sue the defendant in different jurisdictions in the former type of action,(47) but has no choice regarding the place of the suit nor the governing rules when the latter type of suit is contemplated.

Regardless of the cause of action chosen, the original owner seeking to establish his right to :recover from the good-faith purchaser must first prove his own title to the art.(48) Particularly if the stolen art originated in pre-war Europe, this may be a daunting task. In Kunstsammlungen zu Weimar v. Elicofon,(49) the court's description of the plaintiff's proof of ownership of the Duerer paintings at issue took it on a historical, geopolitical, and jurisprudential foray through the major European political upheavals of the twentieth century.(50)

Once the plaintiff's right or title has been established, the key question is whether the good-faith purchaser or a successor to a good-faith purchaser can properly claim the benefit of either a substantive or procedural rule to establish the supremacy of his claim over that of the plaintiff. In all American jurisdictions and most foreign ones,(51) the original owner who did not intend to part with title(52) begins in a superior legal position to the good-faith purchaser whose chain of possession was at one point, and may continue to be, "wrongful."(53) As a result, the burden is typically on the good-faith purchaser to prove his entitlement to the benefit of a rule trumping the owner's title. This rule may be substantive in nature, in the sense that the good-faith purchaser relies on a rule that directly converts his title to a position above the title of the original owner.(54) Alternatively, and more often, this rule, specifically the bar of the statute of limitations, is procedural in nature.(55) In such cases, the superior title of the original owner cannot be asserted against the purchaser or the purchaser's successors because of the limitation, and this bar often is described as resulting in a de facto recognition of a superior title in the good-faith purchaser.(56) A number of courts addressing the issue in the art theft context have concluded that, although statutes of limitations are designed to bar actions and not divest title, the effect is in fact to divest title.(57)

   Before the expiration of the statute, the possessor has both the chattel
   and the right to keep it except as against the true owner. The only
   imperfection in the possessor's right to retain the chattel is the original
   owner's right to repossess it. Once that imperfection is removed, the
   possessor should have good title for all purposes.(58)

Because title is treated as having vested in the good-faith purchaser, he may transfer that title without resurrecting a new right of the owner against the successor.(59) The rules, whether substantive or procedural, defining the relative rights of original owners and good-faith purchasers are referred to generally throughout this Article as "right-defining rules." Each of the major right-defining rules is discussed in the sections that follow.

A. Substantive Right-Defining Rules

Substantive right-defining rules are those that directly favor the rights of the good-faith purchaser over the original owner by immediately shifting title to the good-faith purchaser at the moment of the purchase. As the following sections explain, such rules are extremely rare in American jurisdictions.

1. Rules Recognizing the Immediate Title of the Good-Faith Purchaser of Stolen Art. The substantive rule that most favors the rights of the good-faith purchaser over the rights of the original owner is that which vests title in the purchaser immediately upon his good-faith acquisition. A few foreign nations, including some in Europe from which much stolen art originates, apply such a rule in limited circumstances. Italy, for example, embraces such a rule when the victim of the theft is a private person or entity, but not when the victim is a public institution.(60) England has a more limited rule, of ancient origin, known as "market overt." This rule will immediately vest title in a purchaser if the object was offered for sale in a public market and purchased in good faith.(61) These "immediate vesting" rules represent a minority position among nations, however, at least where the owner has been involuntarily dispossessed through theft. No American state has embraced such a rule where the owner has been involuntarily dispossessed of his property through theft.

2. Rules Recognizing the Immediate Title of the Good-Faith Purchaser After Voluntary Dispossession by the Original Owner. Under American law and the law of many foreign states there is only one scenario in which a good-faith purchaser's claim of title is immediately recognized over that of the original owner. This scenario will arise when the owner voluntarily parts with possession by the creation of a bailment,(62) the bailee converts the chattel, and the nature of the bailment allows a reasonable buyer to conclude that the bailee is empowered to pass the owner's title.(63) Such a situation might arise out of a loan of the art for exhibit, the turning over of the art to a restorer, the consignment(64) of the art to a gallery for sale,(65) or myriad other ways unknown to the ultimate purchaser.(66) The essential fact in all these scenarios is that the owner has voluntarily parted with possession and the bailee has wrongfully sold or transferred the art, either completely without authorization of the owner or in excess of limited authorization given by the owner.(67) A slightly different type of bailment occurs in the rare situation where the owner loses or misplaces the work.(68)

The key to understanding why substantive rules arose to favor a good-faith purchaser(69) in this scenario is to note that, with the exception of property that is lost, it is the owner who purposefully triggered the chain of events that ultimately led to the unauthorized sale to the purchaser. As a California court put it, "[a]n owner who entrusts his property to another bears some responsibility for creating a situation whereby an innocent purchaser is led to buy goods from an agent who is acting in excess of his authority."(70)

This policy is reflected in the Uniform Commercial Code (U.C.C.) rule that an owner who entrusts possession of goods to a merchant who deals in that kind of goods gives that merchant the power to transfer all rights to a buyer in the ordinary course of business.(71) The U.C.C. defines entrustment broadly, including within the term "any delivery and any acquiescence in retention of possession."(72) The significance of this definition is that it captures not only the consignment situation but also the situation in which the owner leaves the art with the bailee for repair(73) or exhibit. The result is that "a merchant may vest good title in the [good-faith] buyer even as against the owner."(74) The lack of authority of the merchant to make the sale does not affect this result.(75)

Under these rules, however, in order to prevail over the original owner, the buyer must qualify as "a buyer in ordinary course of business."(76) The U.C.C. defines such a buyer as "a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights ... of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind."(77) A merchant, as purchaser, will be held to a higher standard of good faith than will other purchasers.(78) Thus, an art gallery owner purchasing a work of art will be held to a heightened standard, but the individual purchaser from the gallery will be held to the "normal" standard.(79) Most jurisdictions leave the precise height of the bar of "reasonable commercial standards" to the trier of fact.(80)

Where the U.C.C. does not govern the case,(81) common law agency principles may also favor the good-faith purchaser over the owner in the voluntary dispossession scenario. Following basic agency principles, "if the seller of a painting has authority to sell it, a buyer and all subsequent buyers will gain whatever title to the painting the seller initially possessed."(82) Whether authority exists is a question for the trier of fact.(83) Such authority may be actual, implied, or apparent,(84) although most disputed art title cases involving the owner's voluntary disposition of the art to a bailee turn on the issue of apparent authority.(85) Under agency principles, apparent authority doctrine leads to the conclusion that "the loss should fall on the principal who has armed the agent with apparent authority and thus has enabled him to obtain the advantage of the person with whom he trades, rather than on the purchaser."(86) Although it is always the case that the purchaser's reliance on the representations of the agent must be reasonable, where apparent authority exists, "the [purchaser] ordinarily has no duty to inquire as to the agent's actual authority, except when the transaction is conducted under extraordinary circumstances that should alert the third party to the danger of fraud," or where the third party is under a special duty.(87) As is true in the entrustment context, art dealers have been held to have a heightened duty to inquire as to such authority.(88)

In both the entrustment and the apparent authority context, the good-faith purchaser is able to claim the benefit of a rule that bestows good title on him immediately upon purchase. Although the acts of the seller or a predecessor to the seller may be wrongful to the original owner,(89) the possession by the good-faith purchaser is never wrongful as to that owner. Thus, a cause of action never accrues in favor of the owner against the purchaser.

B. Procedural Right-Defining Rules: The Bar of the Statute of Limitations

The far more common scenario in which the claim of the original owner of art against the good-faith purchaser arises is that following the involuntary dispossession of the original owner through theft of the art. The rules that have emerged in this context are grounded in policy considerations born of the wrongfulness of the act that parted the owner from his property. When art is stolen, the thief's possession is immediately wrongful, and because the owner's claim accrues immediately, the statute of limitations on that claim is triggered immediately.(90) This rule applies even when the owner is unaware of the theft at the time of its occurrence.(91) Thus, a thief who holds the stolen art beyond the statutory period in which a claim for conversion must be made is not subject to a civil recovery by the owner, although he does not gain title against the owner. Of course, what the bar of the statute of limitations gives the thief, the criminal law takes away.(92) Far more immediate motivations, primarily monetary ones, usually inspire the thief to part with possession long before the conversion limitations period would bar suit by the true owner. Interestingly, however, the influence of the statute of limitations becomes far more complicated when the art, initially in the hands of a thief, comes to rest in the hands of a good-faith purchaser.

Both American and foreign jurisdictions are essentially in accord about the immediate consequences of a transfer by a thief. A thief cannot transfer title because he does not have title.(93) The significance of the good-faith purchaser's lack of title lies in the fact that the titleholder, the owner, has a right to sue the purchaser for the return of the work and, in some circumstances, for damages arising out of the purchaser's wrongful possession. The question is when the statute of limitations begins to run on the owner's claim against the good-faith purchaser.

1. Accrual at Acquisition: Good-Faith Possession as an Immediate Wrong. The traditional rule in American states, and the modern rule in many foreign countries, treats the purchase by a subsequent possessor from a thief, even in good faith, as wrongful from the instant that possession begins.(94) This fact of wrongfulness immediately triggers the clock of the statute of limitations on the owner's cause of action for replevin or conversion against the good-faith purchaser. The fact of immediate wrongfulness may, in the short run, expand the legal exposure of the possessor by opening the full range of liabilities that attend the torts of conversion and replevin.(95) Significantly, in the context of stolen art and the statute of limitations, this characterization in fact benefits the subsequent purchaser.(96) Because the possession is immediately characterized as wrongful, a claim for replevin or conversion has accrued, often despite the fact that neither the owner nor the good-faith purchaser knows it. Unless tolled, the statute will run on the original owner's right to sue relatively quickly and often before the owner is able to discern where and by whom the art is wrongfully possessed.(97)

What, if anything, will toll a statute of limitations to prevent such an outcome varies significantly among states. One ground recently emerging as relevant in the context of good-faith possession of stolen art is the "fraudulent concealment" rule.(98) In most states, a defendant's fraudulent concealment of a cause of action tolls the statute of limitations for the period during which the claim is undiscovered or reasonably undiscoverable by the plaintiff, in essence estopping the defendant from asserting the limitations defense.(99) "[T]he rule of fraudulent concealment is an equitable principle designed to effect substantial justice between the parties; its rationale `is that the culpable defendant should be estopped from profiting by his own wrong to the extent that it hindered an `otherwise diligent' plaintiff in discovering his cause of action.'"(100) The essential fact necessary to a showing of fraudulent concealment is that the defendant has done something affirmatively to prevent discovery of the claim.(101)

Significantly, however, although courts have held that fraudulent concealment of the existence of the cause of action tolls the statute of limitations, several courts called upon to address the issue have refused to extend the doctrine where the cause of action is known to the plaintiff but the identity of the defendant is fraudulently concealed. The distinction between "concealed claims" and "concealed identities" is crucial in the art theft context, because most owners know of the theft, and thus of the cause of action, long before they know the identity of the current possessor.(102)

A significant minority of states has been willing to extend the doctrine to the situation where the identity of the defendant is fraudulently concealed. Bernson v. Browning-Ferris Industries of California, Inc.(103) is illustrative. The California appellate court noted that the general rule that concealed identity does not toll the statute of limitations was an outgrowth of an assumption that the normal limitations period, often extended by the filing of a Doe complaint,(104) usually provides sufficient time to discover the identity of the wrongdoer.(105) "The question here, however, is whether the general rule should apply when, as a result of the defendant's intentional concealment, the plaintiff is not only unaware of the defendant's identity, but is effectively precluded as a practical matter from ascertaining it through normal discovery procedures."(106) Although Bernson is not an art theft case,(107) the court acknowledged that "[t]he problem arises not infrequently when the owner of stolen artwork discovers its whereabouts many years after the theft and files an action to recover the property."(108) As is true when the cause of action itself is concealed, fraudulent concealment of the identity of the defendant tolls the statute only until the plaintiff discovers or, through the exercise of due diligence, should have discovered the identity of the defendant.(109)

Only one court has applied the "concealed identity" variant of the fraudulent concealment doctrine in an art theft case to toll the statute of limitations for the owner in a replevin action against the possessor, and that court did so as an alternate ground for its holding.(110) In Autocephalous Greek-Orthodox Church v. Goldberg, the church brought suit against an Indiana art gallery and its owner to recover extremely valuable mosaics that had been stolen from the Kanakaria Church in northern Cyprus.(111) The bulk of the district court's opinion discussed the application of the discovery rule(112) to postpone the accrual of claims against the good-faith purchaser, the primary ground upon which the court found the church's action to be timely.(113) The court then turned to the alternate ground of its holding, that the church's action was timely under the doctrine of fraudulent concealment.(114)

The court began by noting that the doctrine of fraudulent concealment presupposes that the defendant is in wrongful possession of the property and thus that the plaintiff's cause of action has accrued.(115) Indiana law had already embraced the fraudulent concealment doctrine as applicable in suits for conversion of personal property, including stolen property,(116) and no Indiana case foreclosed application of the doctrine to concealed identity in the art theft context.(117) The court concluded that the plaintiff's inability to discover the possessor of the stolen mosaics was due to the fraudulent concealment of the mosaics by the defendants' predecessors.(118) The court also noted that the plaintiff had exercised due diligence to discover the fraud, as required by Indiana law, and was therefore entitled to invoke the doctrine of fraudulent concealment to toll the statute.(119)

The application of the "concealed identity" variant of the fraudulent concealment doctrine in art theft cases serves the policy interest of barring a defendant from gaining repose through his own fraudulent acts. "[W]here the bar [of the statute of limitations] becomes a sword rather than a shield, wielded by a party that has intentionally cloaked its identity, factors of fairness and unjust enrichment come into play, which courts are bound to consider in equity and good conscience."(120) Nevertheless, the doctrine will rarely be of use to plaintiffs in art theft cases. Although the thief and those with knowledge of the theft might intentionally conceal their identity,(121) good-faith purchasers are unlikely to do so. Such purchasers are not required to be open and notorious in their possession, as might be the case if they were affirmatively claiming title by adverse possession.(122) Rather, in the scenarios where their possession is deemed wrongful from its inception, the statute of limitations will begin to run at that inception, and the toll will occur only in the rare case where the good-faith purchaser has acted affirmatively to prevent discovery of the claim. As a result, in virtually all cases of an owner seeking recovery from a good-faith purchaser deemed to be in wrongful possession, the uninterrupted running of the statute will bar the suit and give title to the purchaser.(123)

2. Accrual Delayed: Wrongfulness of the Good-Faith Purchaser's Possession Postponed. An increasing number of jurisdictions do not characterize possession by a good-faith purchaser as wrongful from its inception, even in situations where the dispossession of the owner originally occurred through theft. These jurisdictions postpone the legal finding of wrongfulness until either the owner demands return of the item and the possessor refuses the demand (the "demand and refusal" rule),(124) or until the time at which the owner, through the exercise of due diligence, knows the identity of the possessor (the discovery rule).(125) The fact that the legal conclusion of wrongfulness is postponed delays the accrual of the plaintiff's claim. This delay of accrual in turn delays the triggering of the statute of limitations. In limited respects, these rules deferring the characterization of wrongfulness protect the good-faith purchaser from liabilities flowing from wrongful possession.(126) This benefit is essentially illusory, however. Although intended to protect innocent purchasers, delayed wrongfulness rules actually benefit original owners in suits to recover stolen art. By delaying the point at which the statute of limitations would begin to run, delayed wrongfulness rules delay the point at which the original owner's suit would be barred.(127)

a. Accrual delayed: the discovery rule. The discovery rule delays the accrual of a cause of action against the good-faith purchaser, thus postponing the triggering of the statute of limitations, until "the injured party [the owner] discovers, or by exercise of reasonable diligence and intelligence should have discovered, facts which form the basis of the cause of action,"(128) including the identity of the possessor.(129) This rule is comprised of two parts. First, it asks when the owner learned enough facts to form the basis of a cause of action "which must include the facts that the works are being held by another and who, or at least where the `other' is."(130) Second, the rule demands that instead of accepting the invitation to "laziness" that might appear to be tolerated or encouraged by the nature of the first inquiry, the true owner must throughout this time "exercise due diligence to investigate the theft and recover the works."(131)

The seminal art theft case incorporating the discovery rule into an owner/good-faith purchaser dispute is O'Keeffe v. Snyder.(132) In 1976, artist Georgia O'Keeffe(133) brought suit to recover three of her paintings from a New Jersey art gallery owner named Barry Snyder. O'Keeffe alleged that the paintings had been stolen in 1946 from a New York art gallery operated by her husband, the famous photographer Alfred Stieglitz.(134) O'Keeffe did not immediately inform anyone, including her husband, of the theft.(135) Although she did tell her husband later, neither he nor she informed the police or any other law enforcement agency, nor did they advertise the loss of the paintings. They did mention the loss to associates in the art world. Not until 1972 did O'Keeffe authorize the reporting of the theft to the Art Dealers Association of America, which maintained a private registry of stolen paintings.(136) In early 1976, O'Keeffe learned from a New York City art gallery that the paintings had been sold for $35,000 to defendant Snyder. When O'Keeffe demanded that Snyder return the paintings, he refused.(137)

Snyder's claim to the paintings traced back through one Ulrich Frank. Frank had sold the paintings through the New York gallery where Snyder had purchased them. Frank claimed possession through a gift from his father in 1965. Frank had kept the paintings in his homes in New Jersey and Pennsylvania and, in 1968, had publicly exhibited them anonymously in a one-day art show in New Jersey.(138)

The two parties filed cross motions for summary judgment. The trial court granted summary judgment to Snyder, the good-faith purchaser.(139) The intermediate appellate court reversed and granted summary judgment to O'Keeffe.(140) Both courts felt constrained by then-existing precedent to treat the issue as one of adverse possession of chattels,(141) and both courts held that Frank had not held the paintings "visibly, openly and notoriously."(142) Notwithstanding this finding, the trial court held that the statute of limitations commenced at the time of theft and expired before O'Keeffe's suit.(143) The intermediate court treated the defenses of adverse possession and the statute of limitations as identical, and thus its resolution of the former governed the latter.(144)

The New Jersey Supreme Court overruled the earlier case(145) that had applied the adverse possession doctrine to chattels and announced that henceforth New Jersey would follow the discovery rule. The court, therefore, remanded the issues of whether in fact the paintings had originally been stolen and the discovery rule's impact upon the timeliness of the plaintiff's claim.(146) Because it left such issues for determination below, the significance of the court's opinion lies in its approval of the application of the discovery rule in the art theft context and in its articulation of broad factors relevant to defining what constitutes due diligence in a given case.

According to O'Keeffe, the underlying purpose of the discovery rule is equitable: "to mitigate unjust results that otherwise might flow from strict adherence to a rule of law."(147) The discovery rule is highly fact-sensitive and flexible.(148) Courts adopting the rule have identified numerous factors relevant to the determination of whether the owner is entitled to its benefit. These factors include the particular efforts undertaken by the owner to search for the stolen art,(149) whether those efforts were reasonable and sufficient given the nature and value of the art and the circumstances of the theft,(150) and whether the owner's efforts were sufficiently continuous.(151) The burden is on the owner "to establish facts that would justify deferring the beginning of the period of limitations."(152) A brief discussion of the facts of two cases involving the discovery rule illustrates the application of the rule.

In the first case, DeWeerth v. Baldinger,(153) the Second Circuit Court of Appeals predicted that New York would impose a duty of reasonable diligence on owners of stolen art for purposes of the statute of limitations.(154) Although this prediction proved wrong,(155) the Second Circuit's opinion offers valuable insight into what constitutes a lack of due diligence for purposes of the rule.

DeWeerth involved competing claims to "Champs de Ble a Vetheuil," a painting by Claude Monet, valued at the time of suit at $500,000.(156) In 1922, Gerda DeWeerth, a citizen of West Germany, inherited the painting from her father, who had purchased it in 1908.(157) The painting hung in DeWeerth's home until 1943, when she sent it to her sister's home, a castle in Oberbalzheim in southern Germany, for safekeeping during the remainder of World War II.(158) After the War, American soldiers were quartered in the castle.(159) Upon their departure, DeWeerth's sister noticed that the painting was missing.(160) The sister notified DeWeerth in the fall of 1945.(161) In 1946, DeWeerth informed the military government of her loss.(162) She also asked her lawyer about insurance coverage for the theft.(163) In 1955, she wrote to an art professor in Germany, sending him a picture of the Monet and asking him to investigate.(164) He returned the picture, stating that the photo was insufficient evidence upon which to begin a search.(165) In 1957, DeWeerth informed the Bundeskreminalamt, the West German equivalent of the FBI, of the theft.(166) None of these efforts were fruitful, and she made no further effort to locate the painting.(167)

The Monet surfaced in the international art market in 1956, when it was consigned by a Swiss art dealer to a New York art gallery. Edith Baldinger purchased the painting from the gallery in June of 1957 for $30,900. From 1957 until 1983, the painting hung in Baldinger's apartment. On two occasions during this time it was publicly exhibited in New York, on one of the occasions for two days and on the other for a month.

In 1981, DeWeerth learned of Baldinger's possession of the painting through her nephew, who saw a picture of it in a published volume of Monet's work. The volume had been published in 1974, and the nephew saw it in a museum not twenty miles from DeWeerth's residence.(168) In 1982, DeWeerth retained counsel in New York and brought an action against the gallery listed in the volume to compel disclosure of the current possessor. The court ruled in her favor, and the …