Legal Squabble Freezes Wallis Art Sale Funds

NEW YORK —  A state court judge issued a temporary restraining order Tuesday freezing more than $40 million in art auction sale proceeds pending a ruling on whether a legal dispute over the money will be resolved here or in Los Angeles County Superior Court.

Justice William Davis, of New York State Supreme Court, said he would rule in a week to 10 days on a motion to dismiss a lawsuit filed here by the Los Angeles County Museum of Art against a foundation established by the late film producer Hal B. Wallis.

In the ruling, Davis is expected to decide whether the New York action will continue or if it is to be dropped so a separate suit filed last week in California can proceed. The Wallis Foundation has urged courts in New York and Los Angeles to transfer jurisdiction to California. The County Museum responded with a petition to allow the suit to continue here.

The issue of which state the suit will be resolved in is important, attorneys said Tuesday, because New York law permits the museum to tie up the proceeds from the sale of 11 paintings once on “permanent loan” to the museum but taken back by the Wallis Foundation and sold at auction May 10. California law may not afford such protection.

Over the weekend, the foundation retained a public relations firm to advocate its position. In a statement Monday, Brent Wallis, Hal Wallis’ son and the head of the foundation, accused the museum of engaging in “a misguided attempt to reap financial gain from the sale of paintings which were plainly the property of the Wallis Foundation.”

In court documents filed Monday night here, the museum countered that the foundation had resorted to “a case study in obfuscation” in a dispute that, the museum contends, revolves around the keeping secret of instructions by Wallis to the trustees of his estate and his foundation that the best artworks in his extensive collection be permanently on view in the county art museum. The museum has charged that the foundation used the permanent loan status of the paintings to successfully petition for favorable treatment of its assets by the Internal Revenue Service.

In court papers filed over the weekend, the Wallis Foundation contended that the County Museum has no legal right to proceed with the lawsuit in New York. Last Friday, the foundation filed a petition in Los Angeles County Superior Court asking that a Los Angeles judge assume jurisdiction because both of the parties to the dispute are incorporated and headquartered in California and virtually all of the individuals involved reside there.

A hearing in the Los Angeles litigation has been scheduled for July 6.

In January, the foundation took back eight Impressionist masterpieces and several other paintings that had been turned over to the museum several months after Wallis’ death in late 1986. The foundation contended that it wanted to take advantage of escalating prices in the art market to increase its cash assets for use in charitable donations.

But the museum contends that the foundation kept secret from it a letter of instructions signed by Wallis ordering that the paintings be kept permanently at the museum or at some other publicly owned facility. The paintings were sold at the Christie’s auction house.