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Graff v. Leslie Hindman Auctioneers, Inc.

United States District Court, N.D. Illinois, Eastern Division

August 9, 2019

STANLEY V. GRAFF, Plaintiff,
v.
LESLIE HINDMAN AUCTIONEERS, INC., THE OWINGS GALLERY, INC., NATHANIEL O. OWINGS, RAY HARVEY, ZAPLIN-LAMPERT GALLERY, INC., and JIM PARKS, Defendants.

          OPINION AND ORDER

          SARA L. ELLIS UNITED STATES DISTRICT JUDGE.

         Plaintiff Stanley V. Graff brings this suit to recover paintings that his wife pawned to Biltmore Loan and Jewelry Scottsdale LLC (“Biltmore”), and of which Biltmore then sold two at auction after Graff's wife defaulted on her loan.[1] In his third amended complaint, Graff brings claims against Leslie Hindman Auctioneers, Inc. (“Leslie Hindman”), and The Owings Gallery, Inc., Nathaniel O. Owings, Ray Harvey, Zaplin-Lampert Gallery, Inc., and Jim Parks (collectively, the “Owings Defendants”). He alleges claims for conversion, unjust enrichment, replevin, detinue, promissory estoppel, promissory fraud, and civil conspiracy. The Court previously dismissed Graff's claims against Leslie Hindman and the Owings Defendants, concluding that Graff had not sufficiently pleaded that the paintings are his separate property and that Texas law only allows him to seek recovery from his wife, and not third parties, for the disposition of community property. Doc. 86 at 11-13. The Court then allowed Graff to file a third amended complaint, finding that it included sufficient allegations to potentially overcome the community property presumption with respect to two of the paintings. Doc. 97 at 3. Leslie Hindman and the Owings Defendants again move to dismiss the claims against them in the third amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).[2] The Court finds it appropriate to allow all but Graff's unjust enrichment and promissory fraud claims to proceed, with Leslie Hindman and the Owings Defendants' arguments better suited to decision after the parties have engaged in discovery.

         BACKGROUND [3]

         Graff, who lives in Dallas, Texas, owned three pieces of Western American art. First, on May 18, 2002, he purchased Taos Indians and the Sangre de Cristos, an oil painting by Oscar Edmund Berninghaus (the “Berninghaus painting”) using his own funds. On May 13, 2006, he purchased Snow Capped Mountains, also referred to as Meadow with Cattle, an oil painting by William Victor Higgins (the “Higgins painting”). He purchased the Higgins painting with funds from a liquidating distribution from ABRES, Ltd., in which he had acquired an equity interest in 2001. On July 29, 2009, he purchased By the Light of the Moon, an oil painting by Frank B. Hoffman (the “Hoffman painting”). Graff was the sole owner of these paintings, which remained his separate property since their purchase. Autumn V. Kraus, a certified public accountant, traced the Berninghaus and Higgins paintings to Graff's separate property.

         On September 28, 2003, Graff married Deborah Graff. In January 2013, Deborah filed for divorce in Dallas, Texas. The Dallas County Family District Court has a standing order applicable to all divorce proceedings, which provides that, during the pendency of the suit, both parties to the proceeding are to refrain from “[s]elling, transferring, assigning, mortgaging, encumbering, or in any other manner alienating any of the property of either party, whether personal property or real property, and whether separate or community, except as specifically authorized by this order.” Doc. 106-1 at 2. But during the pendency of the divorce proceeding, Deborah took the Berninghaus, Higgins, and Hoffman paintings from the Graffs' marital home in Dallas without Graff's permission and pawned them to Biltmore. She thereafter defaulted on her loan.

         Once Deborah defaulted, Biltmore contracted with Leslie Hindman, located in Chicago, Illinois, to sell the three paintings at auction. Biltmore sent the three paintings to Chicago, and Leslie Hindman received them around September 25, 2015. At the Leslie Hindman-organized auction, Biltmore sold the Berninghaus painting to an individual living in Dallas, Texas. Biltmore also sold the Higgins painting to the Owings Defendants. Owings organized this group to purchase the Higgins painting at the auction. The Hoffman painting did not sell at the auction and currently remains in Biltmore's possession.

         Shortly after the auction, in November 2015, Graff learned for the first time that Deborah had removed the Higgins painting from their home and that the Owings Defendants had it in their possession. He learned of this by searching Leslie Hindman's sale records after he found out that Leslie Hindman had auctioned off the Berninghaus painting. Graff then called Harvey for advice and help locating a lawyer to aid in returning his three paintings. Graff did not know that Harvey belonged to the group that had purchased the Higgins painting, but Harvey realized this when speaking to Graff. Harvey informed Graff of this the next day. He told Graff that he could not help Graff and that he had spoken to Owings, who told Harvey that the Owings Defendants had title to the Higgins painting, which would be sold. Graff then contacted Owings, telling him that the Higgins painting had been wrongly taken from him and that he wanted it back. Owings indicated that he still had the Higgins painting, he would not sell it, and he would contact Leslie Hindman about it. But despite this conversation, the Owings Defendants sold the Higgins painting. The sale has since been reversed, and the Owings Gallery has possession of the Higgins painting. See Doc. 48.

         Graff has regained possession of the Berninghaus painting. He has demanded the return of the Higgins painting from the Owings Defendants and the Hoffman painting from Biltmore. The Owings Defendants have refused to return the Higgins painting to Graff. In connection with the divorce proceedings between Graff and Deborah, the divorce court in Dallas County, Texas characterized all three paintings as Graff's separate property.

         LEGAL STANDARD

         A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its merits. Fed.R.Civ.P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a claim's basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

         ANALYSIS

         In this round of briefing concerning Graff's pleadings, Leslie Hindman and the Owings Defendants do not challenge Graff's allegations that the two paintings at issue were his separate property but rather argue that, even so, his claims still fail against them. First, Leslie Hindman and the Owings Defendants contend that, because the divorce court provided Graff with relief for Deborah's actions, he cannot now pursue a second recovery for the same actions in this separate case. They also argue that Graff cannot allege wrongful possession, which underlies many of his claims, because they were good faith purchasers of the Higgins painting. Finally, the Owings Defendants claim that Graff has not sufficiently alleged the elements of his claims for unjust enrichment, promissory estoppel, and promissory fraud.[4]

         I. Double Recovery

         First, both Leslie Hindman and the Owings Defendants argue that the Court should dismiss the third amended complaint because Graff cannot recover a second time for the improper dissipation of his assets. They argue that because Graff's divorce proceedings are final and Graff alleges that the divorce court treated the three paintings as his separate property, Graff has already obtained recovery for any improper dissipation of that separate property. See Twyman v. Twyman, 855 S.W.2d 619, 625 (Tex. 1993) (“[A] spouse should not be allowed to recover tort damages and a disproportionate division of the community estate based on the same conduct.”). Graff responds that he seeks the recovery of the painting themselves, relief that the divorce court could not provide to him. Although the considerations surrounding double recovery may come into play at a later stage of this case, without additional ...


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