Estate Of Nelson v. Rice

12 P.3d 238 (2000)

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Nature of the Case

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Facts

Martha Nelson (P) died in February 1996, Newman and Franz, the copersonal representatives of her estate, employed Judith McKenzie-Larson to appraise the Estate's personal property in preparation for an estate sale. McKenzie told them that she did not appraise fine art and that, if she saw any, they would need to hire an additional appraiser. McKenzie-Larson did not report finding any fine art and relying on her silence, and her appraisal, Newman, and Franz priced and sold the Estate's personal property. D attended the public estate sale and paid the asking price of $60 for two oil paintings. D was not an educated purchaser, had never made more than $55 on any single piece, and had bought many pieces that had turned out to be frauds, forgeries. D assumed the paintings were not originals given their price and the fact that the Estate was managed by professionals, but was attracted to the subject matter of one of the paintings and the frame of the other. At home, he found the signatures on the paintings to those in a book of artists' signatures, noticing they 'appeared to be similar' to that of Martin Johnson Heade. D sent pictures of the paintings to Christie's in New York, hoping they might be Heade's work. Christie's authenticated the paintings, Magnolia Blossoms on Blue Velvet and Cherokee Roses, as paintings by Heade and offered to sell them on consignment. Christie's sold the paintings at auction for $1,072,000. D realized $911,780 from the sale. D learned about the sale in February 1997 and thereafter sued McKenzie-Larson on behalf of the Estate, believing she was entirely responsible for the Estate's loss. McKenzie-Larson had no assets with which to pay damages. D paid income taxes of $337,000 on the profit from the sale of the paintings, purchased a home, created a family trust, and spent some of the funds on living expenses. P sued D in late January 1998, alleging the sale contract should be rescinded or reformed on grounds of mutual mistake and unconscionability. D argued that P bore the risk of mistake, the doctrine of laches precluded reformation of the contract, and unconscionability was not a basis for rescission. The court held that although the parties had been mistaken about the value of the paintings, P bore the risk of that mistake. The court ruled the contract was not unconscionable, finding the parties had not negotiated D's paying the prices the Estate had set. P eventually appealed.