The Second Circuit Court of Appeals has affirmed the judgment against David Bakalar concerning ownership of the drawing Seated Woman with Bent Left Leg (Torso). It is a notable decision first and foremost because it affirms the District Court ruling on the merits of whether the drawing was stolen by the Nazis from the Austrian-Jewish collector Fritz Grünbaum—finding that it was not stolen. Such a ruling is a rarity among wartime restitution cases, the overwhelming majority of which continue to founder on statutes of limitations and jurisdictional defenses. Ironically, even though the court ruled that the work was not stolen and that the current owner could not prove good title, the current owner still prevailed. The details are the key to understanding this case, best described in the District Court decision that the Appeals Court affirmed.
Bakalar is the current owner of the Schiele drawing, having purchased it in good faith in 1964 from the Galerie St. Etienne in New York. Bakalar sought a declaratory judgment that he holds good title to the painting.
The background of the drawing from there gets more complicated. The District Court found that Grünbaum owned the 1917 work prior to the start of World War II. In 1938 Franz Kieslinger, a Nazi art appraiser, inventoried Grünbaum’s collection, but the Court could not determine if the drawing at issue was still a part of it. Based on deposition testimony, the Court found that the drawing was sold to the Galerie Gutekunst in 1956 by Mathilde Lukacs, which later that same year sold it to the Galerie St. Etienne from which Bakalar purchased it.
Fritz Grünbaum’s own fate is better known, unfortunately. In 1938 he was arrested and imprisoned at Dachau. There, he signed a power of attorney in favor of his wife, Elisabeth. Fritz died in Dachau in 1941, and Elisabeth was later interned and died in another concentration camp.
The defendants were related to him in various respects. Milos Vavra is the nephew of Fritz Grünbaum’s niece (his sister Elise Zozuli’s daughter). Zozuli lived in Czechoslovakia after the war, and, according to the Court, made various efforts to obtain the return of Grünbaum property. Various correspondence in the 1950s made reference to the “Brussels sisters,” taken to be Mathilde Lukacs—Elisabeth’s last surviving sibling—after which Zozuli made reference to the matter being “settled.”
The other plaintiff, Leon Fischer, is a relation of Elisabeth. Elisabeth was survived by four siblings, one of whom (Max Herzl) survived the war but died in 1946. Leon Fischer is his grandson, daughter of Rene Herzl.
According to the Court, Fischer’s parents and grandparents remained in contact with Lukacs, even visiting her once in 1959. No record exists of Fischer’s parents ever making a claim to the Grünbaum estate.
An Austrian court declared Vavra and Fischer to be the Grünbaum heirs om 1999 and awarded each a 50% interest in the Grünbaum estate. Apparently in 1963, a German court had declared two cousins of Fritz Grünbaum (Paul and Rita Reift) to be his heirs. The Reifs were themselves unsuccessful in trying to win the return of a Schiele painting, Dead City III, from the Museum of Modern Art in New York.
The Bakalar case was tried once, applying Swiss law, which allows a good faith purchaser to take title even if the object was stolen when it was acquired. Applying that law, the Court found that Bakalar had good title to the drawing. The defendants appealed, and the Court of Appeals ordered that New York law, which is quite different, must be applied. In New York, “a thief cannot pass good title.” Thus, if Vavra and Fischer made a threshold showing that they have an arguable claim to the drawing, Bakalar would bear the burden to prove that it was not stolen.
To make that showing, the defendants argued two theories. First, that the drawing may have been stolen by the Nazis, or second, that Lukacs never acquired good title that she could pass to Bakalar.
The Court found that the most reasonable inference from the fact that the drawing was in Grünbaum’s possession before his arrest and with Lukacs in 1956 was that the drawing remained in the family’s possession the entire time. The alternative—that it was looted but returned to his sister-in-law, seemed implausible. The mere fact that the collection was inventoried—almost certainly a prelude to the intended looting of it—there was no evidence that the confiscation ever took place. Taking all this together, the Court found as a matter of fact that the drawing was not looted by the Nazis.
Next, the Court addressed the argument that even if not stolen, Lukacs did not hold good title. Bakalar responded to that argument by suggesting that the most logical explanation was that Lukacs obtained the work during her lifetime as a gift. Defendants (relying on a passing observation from the Court of Appeals during the first appeal) suggested that no one could have made a gift of the painting, because the power of attorney that Grünbaum signed in Dachau was made under duress and void (and, therefore, any disposition thereafter by anyone other than Grünbaum was ineffective). The District Court rejected this argument, pointing out that earlier cases cited for that proposition were ones in which the collected had “sold” the painting to the Nazis themselves, the very act of looting, which was later voided. The District Court did hold, though, that however plausible the notion that Lukacs had received the drawing as a gift, there was no evidence at all of how she got it or a sufficient legal argument that she would have come to it as an heir under Austrian law. As the party bearing the burden of proof, Bakalar failed, in the Court’s view, to prove that Lukacs ever acquired good title to the drawing.
Yet Bakalar won the case on the defense of “laches.” In layman’s terms, laches is the equivalent sitting on your hands, and failing to enforce your rights in a way that prejudices your opponent. The District Court went through the history of Vavra’s and Fischer’s families’ awareness of the drawing, and their failure to seek to claim it. The lack of any claim to the work while it changed hands ultimately prejudiced Bakalar, the District Court held, enough so that his defense carried the day and he won the trial. Since this was not a preliminary determination, but a trial, the court was charged with actually addressing and ruling on the competing facts. That is significant because it requires more deferential review by the Court of Appeals, and without evidence of “clear error” by the District Court (as opposed to a re-weighing of the evidence), the Court of Appeals had little difficulty in upholding the result.
This is one of the very few restitution claims that has made it to trial—twice—yet the claimant came away empty handed again. Although there was a ruling on the merits about whether the work was stolen, the outcome actually makes sense. As the Court noted, it is hard to imagine a scenario where the drawing was looted, yet ended up back in the same family that was part of the persecuted minority. And, despite the objections that are often raised to laches as a defense, perhaps the simplest explanation really is correct, that the family never sought to get the drawing back because it was sold by the person who had the right to do so (Lukacs). The take here is that claimants and owners can both take heart from this case; the most any litigant can ask for at the start of a case is the chance to lay out his or her story and argue the case.
As with any trial, however, there is always a winner and a loser.
