We typically believe that if we entrust our property to someone else to sell it, the property remains ours until it is sold. However, this may not always be true. If the party into whose hands property has been entrusted files for bankruptcy, the entrusted property may be deemed to be property of the debtor’s bankruptcy estate and the bankruptcy trustee may have the right to sell the property and the debtor’s secured creditors and judgment creditors may even have a higher priority to receive distribution of proceeds from the property’s sale.     

This type of transaction is a “consignment,” which the Uniform Commercial Code (UCC) defines as “a transaction. . . in which a person delivers goods to a merchant for the purpose of sale.” UCC § 9-102(a)(20). To qualify as a consignment, the consigned artwork must have a value of not less than $1,000 and must not be “consumer goods.” UCC § 9-102(a)(20)(B). “Consumer goods” are those which are “used or bought for use primarily for personal, family, or household purposes.” UCC § 9-102(a)(23). Although many artworks will be considered consumer goods, particularly those consigned by art collectors, artworks that are held for investment purposes or which are consigned by art dealers, corporate entities (i.e., corporate collections), or museums are not consumer goods. Also, the party to whom the artwork is consigned (the consignee) must deal in artwork of that kind, must not be an auctioneer, and must not be generally known to sell artworks owned by others. UCC § 9-102(a)(20)(A).     
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At the recent Frieze art fair in London, Italian mid-twentieth century work moved briskly. Sotheby’s Italian and Contemporary sales broke records, including the highest price ever paid for the work of Piero Manzoni, whose “Achrome” sold for £12.6 million. Several galleries focusing on Italian art of the 1950s and 1960s recently opened in London and Paris. Some have suggested that the rising amount of sales activity in Italian mid-century work is driven, at least in part, by pressure exerted by Italian laws restricting the export of art. The Art Newspaper recently reported that “[d]ealers and collectors are rushing to export works from Italy before they fall under the restrictions. . . . The number of works by Arte Povera artists (such as Alberto Burri, Alighiero Boetti, Mario Merz and Michelangelo Pistoletto) sold at auction has grown from 35 in 1997 to nearly 300 in 2013.” Of course, increased auction sales reflect changing tastes and collector interests, but the looming effect of export restriction casts a long shadow over the Arte Povera works held in both public and private collections in Italy.     
Continue Reading Export Restrictions: Italian Mid-Twentieth Century Art

In the United States, with a few exceptions, museums are organized as private charitable trusts or charitable corporations. They derive their purpose from their founders’ charitable purposes. When a museum falters (normally when endowment and other income is insufficient to fund the museum’s operations), options may be limited. In the case of the Fresno Metropolitan Museum of Art, the result was closure and sale of the museum’s assets.

However, as The Barnes Foundation and, more recently, the Corcoran Gallery of Art, have shown, when foundations or other charitable institutions are available as partners, complete dissolution of the museum may be avoided. The question remains: How to accomplish the needed change.
Continue Reading When a Museum Falters: The Corcoran Gallery of Art

The Third Reich’s policy of seizing works of art to build the collection of a planned Fuhrermuseum to be constructed in Linz, Austria, or (for the modern works the regime deemed “entartete Kunst” (degenerate art)) is, by now, well-known. The Rape of Europa (Lynn H. Nicholas, 1994), The Lost Museum (Hector Feliciano, 1995), and The Monuments Men (Robert M. Edsel, 2009) have given detailed accounts of Nazi art looting for a popular audience.

Although the Nazis formal cultural plunder program carried out by the Einsatzstab Reichsleiter Rosenberg (the ERR), was not established until 1940, forced sales and outright theft of works began much earlier. “Forced sales” are transactions in which works were “purchased” from their owners for a fraction of their market price (or for no payment) in circumstances where the owners, frequently but not exclusively Jews, were desperate to secure exit visas or to raise funds for travel costs to escape Nazi-controlled territories. At times such forced sales were given the formal appearance of licit transactions. Before the war’s end, the Allies and the governments-in-exile issued the London Declaration, invalidating “any transfers of, or dealings with, property, rights and interests of any description whatsoever which are, or have been, situated in the territories which have come under the occupation or control” of the Axis power. The policy articulated in the London Declaration applied “whether such transfers of dealings have taken the form of open looting or plunder, or of transactions apparently legal in form, even when they purport to be voluntarily effected.”     
Continue Reading Nazi-Looted Art: Cornelius Gurlitt and Toren v. Federal Republic of Germany and Free State of Bavaria