ACA Galleries, Inc. v. Kinney
2013 U.S. Dist. LEXIS 23983
S.D.N.Y.2013Background
- ACA Galleries purchased a Milton Avery painting from Kinney for $200,000 after ACA’s employee Bergen inspected and believed it genuine.
- Kinney shipped the painting from North Carolina to a New York warehouse for inspection by ACA and prospective buyers.
- ACA later had the Avery Foundation examine the painting and determine it was not authentic.
- ACA demanded a refund and Kinney initially promised but did not return the purchase price.
- ACA and Kinney dispute whether ACA can rescind the contract on mutual mistake and whether Kinney knowingly misrepresented authenticity.
- ACA seeks summary judgment on contract claim; Kinney moves for summary judgment on all claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Mutual mistake as basis for rescission | ACA argues mutual mistake existed regarding authenticity. | Kinney contends mutual mistake cannot be invoked due to ACA’s negligence and risk allocation. | Mutual mistake claim fails; ACA bore the risk and ACA’s negligence bars rescission. |
| Reliance in fraud claims | ACA contends Kinney misrepresented authenticity and ACA reasonably relied. | Kinney argues reliance was unreasonable given ACA’s failure to verify authenticity. | Fraud claims fail as ACA’s reliance was not justifiable. |
| Effect of failure to authenticate pre-purchase | ACA asserts have right to rely on representations despite access to information. | Kinney maintains ACA had opportunity to authenticate and failed to do so. | Failure to investigate pre-purchase precludes reasonable reliance; no fraud or mutual mistake relief. |
Key Cases Cited
- Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40 (2d Cir. 1991) (mutual mistake elements and extinguishing risk reliance)
- P.K. Development, Inc. v. Elvem Dev. Corp., 226 A.D.2d 200 (1st Dep’t 1996) (mutual mistake not available where party bears the risk)
- Stuart Silver Assocs., Inc. v. Baco Dev. Corp., 245 A.D.2d 96 (1st Dep’t 1997) (sophisticated investors’ duty to investigate defeats reliance)
- Peach Parking Corp. v. 346 W. 40th St., LLC, 42 A.D.3d 82 (1st Dep’t 2007) (more rigorous investigation required; cursory inspection inadequate)
- Foxley v. Sotheby’s Inc., 893 F.Supp. 1224 (S.D.N.Y. 1995) (availability of information negates justifiable reliance)
- Danann Realty Corp. v. Harris, 5 N.Y.2d 317 (N.Y. 1959) (defining reasonable reliance under New York law)