## Facts

- Sture Hjalmar Graffman owned a Pablo Picasso painting, *Le peintre et son modèle*.
- Graffman executed a written agreement appointing Miguel Espel and MTS Minor Trading S.A. as his exclusive agents to promote and sell the painting, including through intermediaries.
- Espel arranged for the painting to be shipped to Michael Delecea, a New York art dealer and Espel’s brother-in-law, to market and sell it.
- Graffman knew Delecea possessed the painting for sale purposes and did not object.
- Delecea involved Avanti Gallery, which purchased the painting from Delecea and then resold it to John and Jane Doe, established customers of the gallery, for about $875,000.
- Sale proceeds were routed to Delecea and Espel, but Graffman received none of the money.
- Graffman sued Espel, MTS, Delecea, Avanti, and the Doe purchasers for conversion, seeking return of the painting or damages.
- Avanti and the Doe purchasers moved for summary judgment, asserting they obtained good title under New York’s U.C.C. entrustment rule.

## Issues

1. Whether Graffman’s authorization and acquiescence constituted “entrusting” the painting to a merchant under N.Y. U.C.C. § 2-403(2).
2. Whether Avanti and the Doe purchasers qualified as buyers in the ordinary course who acquired good title, defeating conversion claims.
3. Whether non-dealer purchasers had a duty to conduct additional investigation to maintain buyer-in-ordinary-course status when purchasing from an established gallery.

## Decision

- The court granted summary judgment for Avanti and the Doe purchasers and dismissed the conversion claims against them.
- Graffman’s conduct amounted to entrustment of the painting to a merchant who deals in goods of that kind within the meaning of N.Y. U.C.C. § 2-403(2).
- Avanti and the Doe purchasers purchased in good faith and in the ordinary course of business and therefore took good title.
- The loss from the intermediaries’ failure to remit proceeds was allocated to the entrusting owner rather than innocent downstream purchasers.

## Legal Principles

- Under N.Y. U.C.C. § 2-403(2), entrusting goods to a merchant who deals in goods of that kind gives the merchant power to transfer the entruster’s rights to a buyer in the ordinary course of business.
- Entrustment may be established by voluntary delivery and the owner’s acquiescence to possession by a merchant for sale.
- A buyer in the ordinary course takes in good faith, without knowledge that the sale violates another’s rights, and is protected even if the merchant or intermediary later misappropriates proceeds.
- The entrustment rule allocates the risk of dishonest conduct to the owner who placed the goods with a merchant, in order to protect the reliability and finality of ordinary commercial sales.

## Conclusion

The court held that the owner’s authorization and acquiescence in placing a Picasso with an art dealer for sale constituted entrustment under N.Y. U.C.C. § 2-403(2), allowing good-faith purchasers from a reputable gallery to take good title and barring the owner’s conversion claims against those downstream buyers.


Graffman v. Espel, No. 96 Civ. 8247 (SWK), 1998 WL 55371 (S.D.N.Y. Feb. 11, 1998)