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BERNSTEIN v. BRENNER

December 14, 1970

Aaron BERNSTEIN, Executor of the Will of Louis Bernstein, Deceased, Plaintiff,
v.
Marcella Bernstein BRENNER, Defendant


Gesell, District Judge.


The opinion of the court was delivered by: GESELL

GESELL, District Judge.

 Litigation in this Court entitled "In re Estate of Morris Louis Bernstein, Louis Bernstein, Petitioner, v. Marcella Bernstein, Respondent, Administration No. 107514," was settled and dismissed "with prejudice" by a Consent Order entered October 8, 1964. The present action asks the Court to "rescind, set aside and render invalid" this final settlement. Testimony was taken on rescission commencing September 15, 1970, following extensive pretrial discovery. Numerous exhibits were received, and the record contains a stipulation of some undisputed facts. The issues in this essentially fact case have been fully briefed and argued. This Memorandum Opinion supplements Findings of Fact filed this date and contains the Court's Conclusions of Law upholding the settlement and awarding defendant costs.

 The issue in the prior probate litigation concerned title to numerous paintings created by a deceased artist, Morris Louis Bernstein, who had died intestate without children. Defendant Marcella Bernstein Brenner (administratrix and hence respondent in the administration proceeding) was the artist's widow. She had asserted title to the paintings by survivorship and excluded them from the estate account. Plaintiff Louis Bernstein, who filed the petition commencing the contest in the administration proceeding, was the artist's father. He died August 9, 1969, after the settlement, and one of his sons, Aaron (the father's executor), has been substituted as plaintiff in the present rescission action.

 Throughout the administration proceeding, including all settlement negotiations, both parties were represented by experienced members of the District of Columbia Bar: James A. Earnest for the plaintiff, and I.S. Weissbrodt for the defendant. After substantial pretrial litigation and shortly before trial, counsel negotiated a settlement that was then agreed to by their clients. Defendant paid plaintiff $50,000 in cash. Plaintiff executed a notarized release discharging defendant of "any and all manner of actions * * * [and] claims * * * both at law and in equity * * * by reason or means of any matter or thing from the beginning of the world to the day of the date of these presents." (Defendant's Exhibit 3.) Plaintiff's three adult sons, who had actively participated in the litigation, also agreed to the settlement and each executed a similar release. (Findings 67, 68, 69.) This suit to undo that settlement was commenced more than two years later, on December 16, 1966.

 Morris Louis' output was prolific. There were approximately 577 canvasses rolled up and unsold mainly in the basement of his home at the time of his death. The size, quality, color and theme of these paintings varied markedly. Some canvasses when eventually stretched -- the so-called giants -- covered an entire wall (as much as 11 to 17 feet in one direction), and there were literally hundreds of these huge paintings. Others were smaller, presenting vertical or horizontal stripes, veils, elongated globules or splashes of color. Some canvasses were bright, some brown and dark. Some were clearly defined, others appeared worked over and more uncertain. The group included some paintings that Morris Louis himself had directed be destroyed, and many others that the dealers and critics most favorable to his work considered and continue to consider totally unsalable and unworthy of the painter's true talent. There were, of course, also a relatively small number of paintings that had particular aesthetic appeal for those who had an informed taste for modern art, and these proved highly salable once his best works gradually came to be in vogue after his death.

 Obviously this type of collection raised difficult questions of valuation. Andre Emmerich of the Emmerich Galleries in New York, an early believer in Morris Louis and his agent for the United States before and after his death, made an appraisal of $164,000 at time of death. Emmerich reasoned that given the lack of substantial public interest in the painter, the difficult problems presented by the size and advanced taste of the paintings and wide variations in quality, the collection would bring the most if sold as a unit to a single buyer or syndicate. His valuation on this basis was accepted by the Internal Revenue Service. (Finding 37.)

 The painter's widow was primarily interested in establishing her husband's reputation and acceptance as a painter and felt no immediate financial or other compulsion to flood the market with paintings following death by either a single sale of the collection or by numerous individual sales. She obviously needed advice and technical assistance and turned to obvious sources: Greenberg, an experienced modern art critic; art dealers Emmerich and the Rubins, who had each purchased some of Morris Louis' paintings and had an early appreciation of his competence as well as knowledge of the United States and foreign markets; and Weissbrodt, her lawyer. After careful study, this group decided that only some stripes of better quality had any apparent immediate market and some of these paintings were selectively offered and promoted by a posthumous show at the Emmerich Gallery. After examining some 300 giants, an effort was also made to use a selected few, again the very best, to interest prestige shows such as the Guggenheim and the Venice Biennale. Gradually some stripes and an occasional giant began to sell, often on consignment, at improved prices. This careful, slow and technically difficult process went forward, aided by significant favorable critical comment in newspapers and art publications, prior to and during the time the original lawsuit was pending.

 The suit that led to the settlement here under attack was brought on April 2, 1964, many months after Morris Louis' death. The father and brothers, all of whom lived in Florida, knew little about the aesthetic or commercial aspects of modern art. They had not been in close contact with the painter's creative work during his lifetime. Perhaps, in belief that the paintings were virtually worthless, they at first accepted the widow's accounting, which did not list the paintings as an asset of the estate although they knew of their existence. However, rumors as to amounts received or being asked for particular paintings, and a sense that Morris Louis was apparently "catching on," ultimately sparked their interest in asserting the caveat against the administration. It is now suggested the Bernsteins were unsophisticated, uninformed relatives, easily misled. The documents and impressions gained at the trial do not bear this out. The testimony and numerous letters written by the Bernsteins show their financial astuteness, an ability to appreciate relevant facts, close attention to details and keen acquisitiveness.

 Prior to settlement, plaintiff and his sons had information and rumors leading them to believe, among other things, that the paintings might have a value of as much as $1,500,000 if sold over a long term; that current asking prices were in the range of $10,000 to $12,000 a painting; that sales were going pretty well both in the United States and abroad, where a group had been sold for $30,000; that Morris Louis had become a nationally known artist whose works were being catalogued by the renowned art critic Greenberg and handled by the Emmerich Gallery in the United States and by the Rubins abroad; that there had been numerous magazine articles about Louis' talents and various exhibitions; that there had been a memorial exhibition at the Guggenheim Museum; that Louis' income had supposedly sky-rocketed before his death; and so forth. (Findings 11, 12, 15, 18-20, 29, 41 and 42.) Advice given by Earnest, who wrote careful, detailed letters covering all significant developments, were checked by other lawyers and accountants for the Bernsteins in Florida. They were given access to masses of data, including tax returns, appraisals and correspondence, all pursuant to a broad duces tecum subpoena in aid of discovery served on the widow and Weissbrodt prior to settlement. (Finding 41.)

 If rescission is to be had there must be sufficient proof of misrepresentation and fraud or some breach of fiduciary duty shown. While the complaint in this matter has been amended on a number of occasions, the principal ground for the claim of rescission originally rested upon alleged misrepresentations claimed to be fraudulently made by Weissbrodt in his dealings with Earnest. These alleged misrepresentations concerned the value of the paintings which were the subject of the administrative proceeding. It is unnecessary to discuss misrepresentation in detail, for during trial these claims ultimately focused on a single letter, written by Weissbrodt on October 5, 1964, in response to Earnest's letter of September 30. Both these letters are annexed to the Stipulation of Facts. In his letter of October 5, Weissbrodt stated that while he did "not agree with the statements and assumptions" made by Earnest in reaching an estimate of $350,000 as the net value of the paintings, he was "willing as a premise for settlement purposes to entertain" that figure. Plaintiff contends that this statement was fraudulent in that Weissbrodt knew the $350,000 figure to be well below the actual value of the paintings, yet led Earnest to believe that the figure was a fair estimate. The Court is unable to accept this contention, for it is contrary to the facts and contradicted by common experience.

 Here were two competent, knowledgeable, wary lawyers seeking to arrive at an acceptable money figure which would terminate litigation troublesome to both parties. Earnest had concluded that he wanted $50,000 for the lawsuit, which he eventually got. He presented by his September letter certain factors which he felt supported this objective. Weissbrodt, sensing the trend of Earnest's thinking, was willing to accept certain of his stated premises in order to discuss and hopefully reach a settlement figure, but indicated his disagreement with those premises. He did not make any affirmative representations of value in doing this. It is common practice to approach settlement discussions in this fashion. The full purport of what was said and done between the two lawyers is not known, for Earnest is now dead and Weissbrodt was not questioned in detail about his informal discussions with Earnest. That there were other contacts than those revealed on the face of two letters is undisputed. Neither the widow nor Weissbrodt had any hard information, by way of authoritative opinion or otherwise, as to the value of the collection as a whole other than the estate valuation at time of death. Absent a duty to disclose on Weissbrodt's part -- and there was none, a point discussed more fully below -- there was nothing to compel him to reveal information bearing on the value of the collection, and he did not do so. He simply took a stance in the negotiations which reflected his unwillingness to settle at a higher figure, with the result that Earnest recommended to his client and finally accepted a settlement at $50,000 to avoid the uncertain outcome of a trial.

 Plaintiff treats the question of the value of the paintings as though value were a fact known to Weissbrodt at all times and ascertainable by the simple mathematical process of multiplying the average price received for paintings already sold against the total number of unsold paintings at the time of death. This, of course, is a faulty assumption. The value of the paintings sold related only remotely to the value of the collection as a whole. By constant review and re-examination and a highly selective process, certain paintings had been placed in the market and for exhibition because of their unusually high artistic merit. The remaining paintings were inherently less valuable, many of them were totally unsalable and indeed others had been marked for destruction by the artist. All concerned recognized that to maximize the value of the collection, sales would have to occur over a long period, perhaps ten to fifteen years. Weissbrodt did, in a speculative way, indicate at an early stage of the administration suit that if the paintings continued to be carefully sold over many years and public taste did not change in the meantime the paintings might be worth $1,000,000. He stated this not as fact but as opinion. There is no indication whatsoever that he had any reason to believe at the time he gave this information or up until settlement that his statement was not wholly accurate as an opinion. He never ...


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