In re Christopher Stump Middendorf
Published: Dec. 31, 2002 | Result Date: Feb. 6, 2002 | Filing Date: Jan. 1, 1900 |Case number: 0120625DK – $660,000
Facts
In 1990, the plaintiff was the owner of two paintings, one by Thiebaud (the Thiebaud) and the other by Rothenberg, (the Rothenberg). By letter dated Oct. 30, 1990, the plaintiff sent a letter to Anthony d'Offray, a London art dealer, offering to exchange the two paintings, together with other consideration, for a de Kooning owned by d'Offray. d'Offray agreed and faxed back his written agreement to the transaction. Prior to the agreement, the plaintiff had discussed with d'Offray structuring the proposed transaction as a Section 1031 tax-free exchange. In furthering the agreement with d'Offray, the plaintiff was referred to the defendant who knew of potential purchasers for both the paintings. The defendant informed the plaintiff that the Hirschorn Museum was interested in the Rothenberg for $585,000 and that Robert Lehrman would be a buyer of the Thiebaud for $550,000 net to the plaintiff. In reliance upon the representations of the defendant, the plaintiff arranged for the Rothenberg to be sent to the Hirschorn and for the Thiebaud to be sent to the defendant, both on approval. In further reliance on these representations, and in order to complete the exchange, the plaintiff also guaranteed d'Offray full payment of the proceeds of the two sales by the agreed upon dates. By a fax dated Nov. 7, 1990 from the defendant to the plaintiff, the defendant proposed payment terms for "our" purchase of the paintings. The purchaser of the Thiebaud proposed to pay $450,000 by Nov. 13, 1990 and the remaining $100,000 by Jan. 13, 1991. The plaintiff responded positively but stated that the proceeds from the sale of the paintings be placed in an escrow account pursuant to the plaintiff's instructions that would follow. The plaintiff also noted that he would lend into escrow the $100,000 due from the buyer of the Thiebaud by Jan. 13, 1991 so as to consummate the d'Offray Agreement. The defendant did not send any written communication to the plaintiff in response to the plaintiff's Nov. 7, 1990 letter which suggested that the defendant did not agree to the escrow arrangements. By letter dated Nov. 9, 1990, the plaintiff gave the defendant explicit wire instructions regarding the distribution of the sales proceeds of both the paintings. The defendant confirmed in writing on that same date his agreement to the wire instructions. On Nov. 13, 1990, the buyer of the Thiebaud wired $450,000 into the escrow account as partial payment. On Nov. 13, 1990, the plaintiff wired $100,000 into the escrow account. Notwithstanding the defendant's agreement to transfer $550,000 to d'Offray by no later than November 13, only $450,000 was wired to d'Offray and not until Nov. 16, 1990. On Nov. 20, 1990, the defendant received $585,000 from the Hirschorn in payment for the Rothenberg. The defendant did not disclose this payment to the plaintiff, nor did he deposit it into the escrow account. On Nov. 21, 1990, the defendant wired d'Offray an additional $100,000. This money was not wired from the escrow account. Despite the defendant's agreement in the Nov. 9, 1990 letter from the plaintiff, the defendant did not deposit the Rothenberg sales proceeds of $535,000 into the escrow account or pay to d'Offray such monies by Dec. 23, 1990. On Dec. 26, 1990, the defendant wired d'Offray only $150,000 from the escrow account. When the full proceeds from both sales had not been wired to d'Offray by Dec. 23, 1990, as the defendant had agreed to do in the Nov. 9, 1990 letter, the plaintiff, as guarantor, subsequently paid d'Offray the full balance of $385,000 due d'Offray. The defendant was required to remit to d'Offray a total of $1,085,000 from the sales of the two paintings. The defendant was also required to repay the plaintiff, or cause the plaintiff to be repaid, the $100,000 loan. * * *
Settlement Discussions
The defendant offered to settle at $25,000. The plaintiff demanded $150,000.
Damages
The plaintiff alleged he suffered monetary damages in the amount of $535,000 for payments he had to make in 1991 as a result of the defendant's theft of the paintings.
Result
The award totalled $660,000 plus interest since 1992. It comprised $535,000 economic damages and $125,000 in punitive damages. The court in pre-trial motions ruled that the settlement agreement and stipulated facts would be used as additional evidence, but not used as collateral estoppel on the non-dischargeability issues. After a one-day trial, the Bankruptcy Court found that the entire 1992 District of Columbia Consent Judgment for $660,000 was non-dischargeable pursuant to 11 U.S.C. Sections 523 (a)(4) and (6). Pursuant to the accrual of interest authorized by the District of Columbia, Official Code Section 15-109, the 1992 judgment has accrued to approximately $1 million.
Other Information
* * * The defendant received or controlled $1,235,000 in cash from the sale of the paintings, plus the $100,000 loan from the plaintiff. The defendant did not disburse all of these funds according to who was entitled to them. Rather, the defendant intentionally converted some of those funds, in the amount of $485,000 to his own use in order to pay other debts knowing of the violation of the rights of the plaintiff and d'Offay. Alternatively, the defendant intentionally converted to his own use one or both of the paintings by selling them as if he, the defendant were the owner. Additionally, the defendant converted to its own use the $50,000 commission, to which he was not entitled to until payment was made in full for the paintings pursuant to the Nov. 9, 1990 letter agreement. After filing a lawsuit against the defendant in 1991, a Consent Order of Judgment was entered on or about June 15, 1992, in case No. 91-2069, in the United States District Court, District of Columbia, awarding the plaintiff a judgment in the amount of $660,000 plus interest. The parties agreed to the relevant facts as stated above and memorialized the same in a Stipulated Findings of Fact and Settlement Agreement. The defendant executed the Settlement Agreement which specifically refers to the Stipulated Findings of Fact and incorporates them by reference. In the Settlement Agreement and Stipulated Findings of Fact, the defendant admits to conversion, willful and intentional tortuous acts, the plaintiff's right to punitive damages against the defendant, facts that support fraud, and his non-opposition to the non-dischargeability of the debt evidenced by the Consent Order.
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