A general release: the end of a litigation or relinquishment of a right? Every attorney and litigant often breathes a sigh of relief when a litigation comes to a conclusion. But is that always the case? Not when the release covers more than may have been intended.
In a recent decision by Commercial Division Justice Andrea Masley, the Court held that a general form release, which settled a dispute involving one piece of artwork within an allegedly stolen collection of several other pieces of artwork, barred Plaintiff from bringing a subsequent action to recover any other pieces within the collection.
In Frenk v. Solomon, Paul Westheim (“Westheim”), a famous Jewish art critic who specialized in German expressionist art, fled Nazi Germany in 1933 and entrusted his art collection with an art dealer in Berlin, Ms. Weidler (“Weidler”). Westheim later married Ms. Westheim-Frenk. After World War II, Weidler claimed that the art collection was destroyed in the war, but Plaintiff (Westheim-Frenk’s daughter) alleged that Weidler stole Westheim’s art collection and sold it in separate pieces.
In 1973, late Westheim’s wife (“Westheim-Frenk”) commenced an action against Weidler, because Weidler sold a paining from Westheim’s art collection (the “First Action”). That matter settled before discovery and was “discontinued ‘with prejudice.’” Westheim-Frenk, represented by New York counsel, executed a blanket release (the “Release”), discharging Weidler, her “heirs, executors, administrators, successors and assigns” from all claims that Westheim-Frenk “ever had, now have, or which [Ms. Wetheim-Frenk] or [her] heirs, executors, or administrators, hereafter can, shall or may have.” In consideration for the Release, Plaintiff’s mother received $7,500.00, which is equivalent to about $40,000.00 today.
In or about January of 2013, Plaintiff initiated the instant action against the executors of Weidler’s estate and her heirs, seeking to recover the valuable artwork from Westheim’s art collection, as well as damages and a judgment declaring that she was entitled to the artwork.
Following discovery, the defendants moved for summary judgment alleging that the Release and stipulation discontinuing the First Action barred Plaintiff’s claim under the doctrine of res judicata; and nothing in the broad Release was “intended to be narrowly applied to any one painting, but rather, to the entire collection.” The terms of the broad Release bar Plaintiff from bringing an action against Weidler, or her “heirs, executors, administrators, successors and assigns.” Because the defendants demonstrated the prima facie defense of release, the burden shifted to Plaintiff to evidence material issues of fact to defeat summary judgement. See Aoki v. Aoki.
In seeking to limit the broad Release, Plaintiff argues that the subject of the First Action was the artwork, entitled Portrait of Dr. Robert Freund, and, thus, that the Release applied only to that piece. Alternatively, Plaintiff argues that Westheim-Frenk was fraudulently induced by Weidler to execute the Release and, thus, the defendants should be estopped from using the Release. However, the defendants objected to Plaintiff’s use of parol evidence. Justice Masley held that because the Release contained a standardized form, the court “must be flexible in the application of the parol evidence rule.”
Plaintiff also attempted to identify a transaction between Ms. Weidler and Westheim-Frenk in support of her claim that the Release only pertained to the single painting. Plaintiff argued that in 1976, when Weidler attempted to sell another piece from Westheim’s collection, Weidler entered into an agreement to split the sale amount of the artwork—a deal which would clearly not make sense if the Release pertained to all the artwork in Westheim’s collection. On the other hand, the defendants identify a letter from Westheim-Frenk stating that she understood that nothing could be done regarding all future artwork that may turn up. Next, Plaintiff argued that it is inconceivable that the low settlement amount from the First Action ($7,500.00) would have covered all the other valuable artwork. Justice Masley, however, rejected these conclusory arguments, holding that Plaintiff’s “evidence of conduct and intent is inconclusive” in light of the clear and unambiguous language of the Release.
In that regard, the First Department has held that “to hold a release forever hostage to legal afterthoughts basically vitiates the nature of the release.” See Aoki v. Aoki. Although Plaintiff argued that the Release should be set aside because Weidler used fraud to obtain same, Justice Masley held that in order to set aside the Release on the ground of fraud, Plaintiff had to establish that the fraud was separate from the subject of the Release, in addition to all the basic elements of fraud. Plaintiff, however, failed to identify any of Weidler’s misrepresentations at the time the Release was executed. In fact, there was no support for a claim that Westheim-Frenk was defrauded when she signed the release. Interestingly, Justice Masley held that plaintiff’s mother “failed to condition the Release on the truth of the information . . . i.e. that there were no other artworks from Westheim’s collection.” The Court finally also determined that Weidler did not waive the Release and Plaintiff did not present any evidence demonstrating that Weidler “intentionally relinquish[ed] a known right.”
Accordingly, because the Release was clear and unambiguous, the Court granted the defendants’ motion for summary judgment and dismissed the action.
Takeaway: Be especially precautious when drafting a release for a client, making sure not to waive any of their rights. Here, Justice Masley recognized that Plaintiff’s mother was represented by counsel when entering into the general release. This could potentially open you to a malpractice lawsuit.
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