Court Opinion

ID: 9952456
Source: CourtListenerOpinion
Date Created: 2024-03-19 20:08:52.764564+00
Date Added: 2024-06-11T14:39:39.333123
License: Public Domain

Judd Found. v Kukje Gallery, Inc.
               2024 NY Slip Op 30834(U)
                     March 15, 2024
           Supreme Court, New York County
        Docket Number: Index No. 158505/2022
                Judge: Nancy M. Bannon
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                                                                                                                     INDEX NO. 158505/2022
  NYSCEF DOC. NO. 31                                                                                           RECEIVED NYSCEF: 03/15/2024

                                   SUPREME COURT OF THE STATE OF NEW YORK
                                             NEW YORK COUNTY
            PRESENT:             HON. NANCY M. BANNON                                            PART                              61M
                                                                                      Justice
            ---------------------------------------------------------------------------------X   INDEX NO.          158505/2022
                JUDD FOUNDATION,
                                                                                                 MOTION DATE          3/3/2023
                                                         Plaintiff,
                                                                                                 MOTION SEQ. NO.         001
                                                 -v-
                KUKJE GALLERY, INC. S/H/A KUKJE GALLERY, TINA KIM
                                                                                                   DECISION + ORDER ON
                GALLERY, LLC S/H/A TINA KIM GALLERY,
                                                                                                         MOTION
                                                         Defendants.
            ---------------------------------------------------------------------------------X

            The following e-filed documents, listed by NYSCEF document number (Motion 001) 9, 10, 11, 12, 13, 14,
            15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 27, 28, 29
            were read on this motion to/for                                                       DISMISSAL                        .

                                                                 I.     INTRODUCTION
                      In this breach of contract action to recover for damage to an artwork pursuant to a
            consignment agreement, the defendants move to dismiss the complaint pursuant to CPLR
            3211(a)(5) as barred by the applicable statute of limitations. The plaintiff opposes the motion.
            The motion is granted.1
                                                                 II.     BACKGROUND
                      The following facts, taken as true for purposes of the present motion, are drawn from the
            complaint. On March 16, 2015, the plaintiff, Judd Foundation (the “Foundation”), entered into a
            consignment agreement with defendant Kukje Gallery, Inc. (the “Gallery”), pursuant to which
            the Foundation consigned a sculpture by the artist Donald Judd to the Gallery for sale at a price
            of $750,000, reflecting the sculpture’s agreed-upon fair market value (the “Retail Value”). The
            sculpture was consigned to the Gallery for an indefinite term, “until recalled” by the Foundation.
            The agreement required the Gallery to “exercise all due care in maintaining and securing” the

            1
             The defendants also move to dismiss the complaint as against defendant Tina Kim Gallery, LLC pursuant to CPLR
            3211(a)(1) and/or (a)(7)—the specific subdivision is not clear from the moving papers—arguing that no claim for
            breach of contract may lie against this defendant due to a lack of contractual privity. Because the court grants the
            motion to dismiss the complaint in its entirety as time-barred, the court does not reach this secondary privity issue.
                158505/2022 JUDD FOUNDATION vs. KUKJE GALLERY, INC. S/H/A KUKJE GALLERY ET AL                        Page 1 of 5
                Motion No. 001

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  NYSCEF DOC. NO. 31                                                                         RECEIVED NYSCEF: 03/15/2024

            sculpture, and expressly held the Gallery responsible for any damage to the sculpture during the
            course of the consignment. Specifically, the Gallery assumed responsibility for “any loss or
            damage not compensated by insurance,” and agreed to “indemnif[y] the [Foundation] against any
            such uncompensated loss or damage, up to the amount of [the sculpture’s] stated Retail Value.”
            The agreement also required the Gallery to provide the Foundation a certificate of insurance
            naming the Foundation as an additional insured for any claim for damage to the sculpture, which
            certificate was duly delivered to the Foundation.

                   The agreement was twice extended, on October 23, 2015, for an indefinite term, “until
            recalled” by the Foundation, and again on April 26, 2017, for a one-year term terminating on
            April 26, 2018. The 2015 extension increased the agreed-upon Retail Value to $800,000. The
            2017 extension further increased the Retail Value to $850,000. The agreement and its two
            extensions (collectively, the “Consignment Agreements”) provide that they shall be governed by
            Texas law.

                   A condition report dated July 1, 2017, prepared by a third party for defendant Tina Kim
            Gallery, LLC, the Gallery’s New York affiliate, indicated the sculpture’s condition was marred
            by “potential fingerprints” and “a small blemish.” Subsequent condition reports prepared for the
            Gallery, dated March 16, 2018 and June 29, 2018, likewise noted “potential fingerprints” and
            “blemishes” on the sculpture.

                   On May 9, 2018, the Foundation informed the Gallery that the consignment was
            terminated and the sculpture should be returned to the Foundation. The sculpture was thereafter
            duly returned by the Gallery and received by the Foundation on July 25, 2018. The defendants
            submit a shipping invoice showing that a Tara Horning signed for the delivery on behalf of the
            Foundation, agreeing that it was “received in good condition.” In any event, at that time or some
            point thereafter, when the sculpture was uncrated and examined by a conservator, the Foundation
            discovered that it “had been disfigured by fingerprints.” On December 21, 2018, the Foundation
            formally alerted the Gallery that the sculpture had been returned “significantly damaged by
            fingerprints.” Having determined that the damage to the sculpture was irreversible, and that the
            sculpture was therefore unsaleable, the Foundation entered into extended negotiations with the
            defendants and their insurers to determine the appropriate amount of compensation. Details of
            the ensuing 2 ½ years are thin. In May 2021, the Foundation entered into a settlement agreement

             158505/2022 JUDD FOUNDATION vs. KUKJE GALLERY, INC. S/H/A KUKJE GALLERY ET AL         Page 2 of 5
             Motion No. 001

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  NYSCEF DOC. NO. 31                                                                         RECEIVED NYSCEF: 03/15/2024

            with the defendants’ insurers pursuant to which the insurers paid the Foundation $680,000 in
            return for a release of all claims against the insurers with respect to the sculpture.

                   The Foundation thereafter demanded that the defendants reimburse it the $170,000
            difference between what the insurers paid for the loss and the $850,000 Retail Value specified in
            the 2017 extension of the consignment agreement. The defendants did not, and have not,
            complied with this demand. Consequently, on October 4, 2022, the Foundation commenced this
            litigation by the filing of its summons and complaint. In the complaint, the Foundation asserted
            a single cause of action for breach of contract, alleging, inter alia, that the defendants “damaged
            the [sculpture]” while it was in their possession pursuant to the Consignment Agreements, and
            that the defendants “have failed to compensate [the Foundation] for the difference between the
            settlement amount paid by Defendants’ insurance company and the full current Retail Value of
            the [sculpture], as required under the Consignment Agreements.”

                   The defendants now move to dismiss pursuant to CPLR 3211(a)(5).

                                                    III.   DISCUSSION
                   Under Texas law, a claim of breach of contract must be commenced within four years of
            the date that the cause of action accrues. See Tex. Civ. Prac. & Rem. Code §§ 16.004(a)(3),
            16.051; Nghiem v Sajib, 567 SW3d 718, 722 n.20 (Tex. 2019); Stine v Stewart, 80 SW3d 586,
            592 (Tex. 2002). Generally, “a cause of action accrues when a wrongful act causes a legal
            injury, regardless of when the plaintiff learns of that injury or if all resulting damages have yet to
            occur.” Provident Life & Acc. Ins. Co. v Knott, 128 SW3d 211, 221 (Tex. 2003). A breach of
            contract claim, in particular, accrues “when the contract is breached.” Stine v Stewart, supra.
            However, in certain limited circumstances, where a contract is continuing and long-term, with no
            firm restrictions placed on the time frame for performance, Texas courts have held that the
            statute of limitations begins to run ‘“only when the injured parted elected to treat the contract as
            terminated.”’ Tucker v Bedgood, No. 13-16-00433-CV, 2016 WL 7011584, at *6 (Tex. App.
            Dec. 1, 2016), disapproved of on other grounds by Agar Corp., Inc. v Electro Cirs. Int’l, LLC,
            580 SW3d 136 (Tex. 2019), quoting Pickett v Keene, 47 SW3d 67, 77 (Tex. App. 2001).
            Additionally, in limited circumstances, where “the nature of the injury incurred is inherently
            undiscoverable and the evidence of injury is objectively verifiable[,]” Texas courts apply a

             158505/2022 JUDD FOUNDATION vs. KUKJE GALLERY, INC. S/H/A KUKJE GALLERY ET AL           Page 3 of 5
             Motion No. 001

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  NYSCEF DOC. NO. 31                                                                         RECEIVED NYSCEF: 03/15/2024

            “discovery rule,” which “defers accrual of a claim until the injured party learned of, or in the
            exercise of reasonable diligence should have learned of, the wrongful act causing the injury.”
            Cosgrove v Cade, 468 SW3d 32, 36 (Tex. 2015) (internal quotation marks omitted).

                   Here, the Foundation’s complaint, filed on October 4, 2022, is untimely under any of the
            above standards. The Foundation seeks to recover for damage to the sculpture. The damage to
            the sculpture—i.e., the “wrongful act caus[ing] a legal injury” [Provident Life & Acc. Ins. Co. v
            Knott, supra]—was first noted in the condition report dated July 1, 2017, more than four years
            before the complaint was filed. To be sure, the Foundation alleges that the defendants did not
            inform it of the damage noted in this or the two subsequent condition reports. But even if the
            court were to apply Texas’s discovery rule, the accrual date for the Foundation’s claim would
            only be deferred to July 25, 2018, the date that the sculpture was returned to the Foundation. At
            that point the Foundation, in the exercise of reasonable due diligence, should have learned of its
            injury, as it is undisputed that the damage to the sculpture was readily apparent upon inspection.
            See Cosgrove v Cade, supra. Alternatively, assuming, arguendo, that the Consignment
            Agreements may be deemed a “continuing contract,” the Foundation’s claim would still accrue
            no later than May 9, 2018, the date it informed the Gallery of its decision to terminate the
            agreement. See Tucker v Bedgood, supra; Pickett v Keene, supra.

                   The Foundation’s argument that its claim did not accrue until May 2021, when it entered
            into a settlement agreement with the defendants’ insurers, is unavailing. The Gallery agreed to
            be responsible for and “indemnif[y] the [Foundation] against any . . . loss or damage” not
            compensated by insurance. Contrary to the Foundation’s contention, however, this does not
            mean that its claim did not accrue until the amount of compensation to be paid by insurance was
            definitively set and the defendants failed to pay the difference. At root, the Foundation’s claim is
            inescapably premised on the damage to the sculpture, without which there would be no insurance
            payout to begin with. Indeed, the compensation from the insurers merely serves to reduce the
            sum recoverable from the Gallery for the underlying damage to the artwork. Stated differently,
            had there been no payment at all from the insurers, the Foundation would still have effectively
            the same breach of contract claim, just for the full amount of the Retail Value rather than the
            20% of that amount not paid by the insurers. See United Healthcare v First St. Hosp., 570 SW3d

             158505/2022 JUDD FOUNDATION vs. KUKJE GALLERY, INC. S/H/A KUKJE GALLERY ET AL         Page 4 of 5
             Motion No. 001

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            323, 335 (Tex. App. 2018) (“[T]he accrual date is not dependent on whether all resulting
            damages have . . . occurred.”) (internal quotation marks omitted).

                    Moreover, it is simply not true, as the Foundation asserts, that its claim did not mature,
            and was not justiciable, until after the insurance payout. As already noted, the Foundation’s right
            to recover from the Gallery was expressly denominated an indemnity obligation in the
            Consignment Agreements, and this duty to indemnify was “properly justiciable by declaratory
            judgment” before May 2021. See Stewart Title Guar. Co. v Hadnot, 101 SW3d 642, 647 (Tex.
            App. 2003) (holding that limitations period on breach of contract claim began to run when
            defendant insurer denied insurance claim rather than being tolled until after judgment was
            rendered in an underlying lawsuit). Nor is there any provision in the Consignment Agreements
            that bars suit prior to payment by the insurance company. Thus, the Foundation could have
            preserved its claim by simply seeking a declaratory judgment as to its right to indemnity under
            the contract.

                                                    IV.    CONCLUSION
                    Accordingly, upon the foregoing papers and after oral argument, it is

                    ORDERED that the motion of defendants Kukje Gallery, Inc. s/h/a Kukje Gallery and
            Tina Kim Gallery, LLC s/h/a Tina Kim Gallery to dismiss the complaint pursuant to CPLR
            3211(a)(5) is granted, and the complaint is dismissed; and it is further

                    ORDERED that the Clerk shall enter judgment accordingly.

                    This constitutes the Decision and Order of the court.

                    3/15/2024
                      DATE                                                      NANCY M. BANNON, J.S.C.
             CHECK ONE:               X   CASE DISPOSED                  NON-FINAL DISPOSITION

                                      X   GRANTED             DENIED     GRANTED IN PART             OTHER

             APPLICATION:                 SETTLE ORDER                   SUBMIT ORDER

             CHECK IF APPROPRIATE:        INCLUDES TRANSFER/REASSIGN     FIDUCIARY APPOINTMENT       REFERENCE

             158505/2022 JUDD FOUNDATION vs. KUKJE GALLERY, INC. S/H/A KUKJE GALLERY ET AL         Page 5 of 5
             Motion No. 001

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