The case against statutes of limitations for stolen art.

• Author: Bibas, Steven A.

In the mid-1960's, a mailroom clerk at the Guggenheim Museum in New York City stole a Marc Chagall watercolor entitled The Cattle Dealer. Museum officials did not notify the police, the FBI, Interpol, or other museums or galleries of the theft. In 1967, Jules and Rachel Lubell bought The Cattle Dealer from a reputable New York gallery and displayed it in their home for over two decades. After learning of the painting's location in 1985, museum officials demanded its return. When Mrs. Lubell refused, the museum began a lawsuit that dragged on for years.(1) Mrs. Lubell claimed ownership as an adverse possessor and under the statute of limitations.(2) In 1991, the New York Court of Appeals sent the case back to the trial court for a determination of the relative blameworthiness of the parties, further prolonging the litigation.(3)

The balancing-test approach adopted by the New York Court of Appeals in Guggenheim exemplifies one of several tangled threads in the law of stolen chattels.(4) Many of the commentators who have written about statutes of limitations for personal property advocate adverse possession, a doctrine borrowed from land law.(5) Other authors endorse a multi-factor balancing of the equities called the discovery rule, an approach similar to the one adopted in Guggenheim.(6) Related doctrines, such as the due diligence and laches rules, also balance the relative equities of the parties.(7)

All of these approaches are flawed. Adverse possession, a doctrine that works well for real estate, is not suited to the very different realm of movable, concealable personal property. Because it ignores an owner's diligence, adverse possession doctrine hurts diligent owners who have reported thefts but are unable to find their property. Since multi-factor balancing tests do not automatically award title to theft victims, they do not adequately deter trafficking in stolen goods. Adverse possession law and balancing tests do not automatically reward theft reporting, nor does either doctrine routinely penalize the purchase of stolen property. Thus, neither approach creates adequate incentives to report thefts and deter the buying of stolen art.(8) Judges and academics have been too preoccupied with ex post dispute resolution to see the ex ante impact of their rules upon future behavior. Therefore, current approaches fuel the market for stolen goods and encourage more thefts.

This Note's thesis is simple: victims of art thefts who promptly report the thefts to the police and to a computerized theft database should never be legally barred from recovering their property. In other words, statutes of limitations should not apply to actions brought by owners who have promptly taken two simple steps to protect their legal titles. Often, a so-called bona fide purchaser (BFP) is negligent when investigating title to an artwork. Now that an international computerized art-theft registry is available, buyers should be encouraged to check the registry and should be held liable if they fail to do so.

Part I of this Note surveys the arguments commentators have marshalled in support of statutes of limitations for personal property and considers the judicial trend toward restricting protection of BFP's. Courts have gradually offered more protection to owners but have done so ad hoc, suggesting that the time is ripe for wholesale legislative reform. Part II criticizes the arguments for protecting BFP's from diligent owners' claims. Part III outlines an alternative legal regime that would protect a BFP if and only if the owner had not reported the theft. This Note concludes that protecting owners by abolishing limitation periods for many types of personal property would be both economically efficient and morally just.

1. LIMITATION PERIODS FOR CHATTELS: COMMENTATORS AND COURTS

   To understand why the current law is unsatisfactory, one must understand what the law is and how it arose. Adverse possession, for instance, is a land law doctrine that courts first imported into cases involving stolen animals. Adverse possession may have suited stolen horses in the late nineteenth century, but it works poorly for small, concealable objects (such as artworks) in a highly mobile society. Recognizing that this real-property doctrine is inappropriate for most personal property, courts and commentators have moved toward case-by-case balancing of the relative diligence and blameworthiness of each theft victim and each buyer. Judges and academics have gradually recognized that theft victims often deserve to recover their art from buyers of stolen goods. But because no one has advocated bright-line rules, the law has perpetuated perverse incentives for buyers not to investigate title and has failed to encourage victims to report thefts, as Part III argues.

   Section A lays out the common law rule that protects an original owner's title to stolen goods. More than a century ago, American courts and commentators began supporting adverse possession of chattels, a doctrine that favors buyers. Section B explores this approach. More recently, courts have drifted away from protecting buyers by tempering limitation periods in various circumstances. In art theft cases in particular, they have been less willing to find for possessors than most academics would be. Sections C and D consider doctrines the courts have used to curtail protection for buyers of stolen art: the demand-and-refusal rule, the laches rule, the due diligence doctrine, and the discovery rule. Section E considers the reasons behind the gradual erosion of protection for possessors. When courts face real cases involving real people, judges and juries intuitively blame the possessor because he(9) is usually the least cost avoider and is at least as negligent as the theft victim. Courts have increasingly favored owners, but they have done so in an ad hoc fashion. As Part III argues, Congress should replace this ad hoc judicial approach with an explicit, bright-line rule that would deter art theft.

   1. The Common Law of Stolen Property

      At common law, a thief's title is void.(10) The thief cannot give a buyer, even a BFP, good title.(11) Thus, a buyer does not take title if somewhere back in the buyer's chain of title a claim rests on theft.(12) Over the past century, the various doctrines of limitation periods described below have carved out exceptions to this rule. Nevertheless, the Uniform Commercial Code perpetuates the common law rule: unless one of the limitation doctrines applies, title remains in the original owner.(13)

   2. Adverse Possession of Chattels

      1. Academic Literature

         Under adverse possession doctrine, a possessor who has actual, exclusive, open, notorious, continuous, and hostile possession of land under a claim of right for the statutory period can take good title and thereby defeat the original owner's claim.(14) Academics have long argued that adverse possession of chattels is desirable for precisely the same reasons that adverse possession of land is: namely, to punish the original owner's delay, to protect the possessor's settled expectations, and to avoid the evidentiary problems caused by stale claims.(15)

         Some authors have recognized differences between realty and personalty but have nonetheless supported adverse possession for both. John Dawson, for instance, noted that the usual requirement of open and notorious possession does not fit chattels well because chattels are movable and often inconspicuous.(16) Nonetheless, he supported adverse possession of chattels as a way of protecting a BFP's reliance interest.(17) Similarly, Patty Gerstenblith notes that even if a possessor uses personal property openly, notoriously, and visibly, a diligent owner may still have no notice of her property's whereabouts.(18) Thus, Gerstenblith says, courts face a difficult choice between two innocent parties.(19) Nevertheless, she supports adverse possession of chattels because it protects commercial expectations and rewards possessors' good faith.(20) In her opinion, an adverse possession rule that relies on possessors' good faith is a clear, predictable, fair substitute for the requirement of open and notorious possession.(21)

      2. Case Law on Adverse Possession

         By barring untimely suits by owners to recover property, statutes of limitations indirectly defeat the common law rule that a thief cannot pass title. Though most statutes of limitations for recovering personal property do not mention the requirements for adverse possession of land, courts have read such standards into the statutes.(22) This approach was firmly settled by the first quarter of this century. The majority of reported cases on adverse possession of chattels between 1870 and 1930 involved horses, cattle, sheep, and mules.(23)

         This case law, crafted to fit stolen animals that remained in one state, did not work nearly as well when it was later extrapolated to cover smaller, concealable goods (such as artworks) that had been transported to a different state or nation. Because adverse possession of chattels unfairly penalizes theft victims who cannot find their goods, many jurisdictions have replaced adverse possession law with various balancing-test doctrines.(24)

         In the seminal case of Dragoo v. Cooper,(25) Cooper sued to recover a stolen horse from Dragoo, a BFP who had held the horse for four years. The court held for Dragoo. "[W]e perceive no valid reason why the rule of construction adopted in suits relating to realty [i.e., adverse possession] shall not be applied in actions for the recovery of personalty."(26) The court claimed that the policies of quieting titles and preventing lawsuits apply equally to chattels and land.(27) The Dragoo scenario recurred in different states, with different animals, over the next six decades. Courts gradually imported more and more of the land law tests into the law of chattels. One court, for example, stressed that a possessor had held openly and notoriously.(28)

         Animals...