Court of Appeals of New York
372 N.E.2d 291 (1977)
Mark Rothko’s will named as executors his close friends, Bernard J. Reis, Theodoros Stamos, and Morton Levine (Executors) (defendants), who were responsible for selling seven hundred and ninety-eight of Rothko’s paintings. The Executors entered into two contracts with Marlborough A.G. (MAG) and Marlborough Gallery Inc. (MGI) (defendants), under which they sold or consigned all of the paintings within three weeks of receiving letters testamentary. In the first agreement, MAG purchased one hundred paintings for $1,800,000 and MGI agreed to consign approximately seven hundred paintings for a fifty percent commission. Mark Rothko’s children, Kate and Christopher Rothko (plaintiffs), joined by the Attorney General on behalf of the residuary legatee, the Mark Rothko Foundation, Inc. (plaintiff), commenced actions to have the Executors removed, the agreements the Executors executed with MAG and MGI rescinded and the paintings returned to the estate. Despite the court’s grant of a temporary restraining order and preliminary injunction barring disposition of the paintings, Francis K. Lloyd (defendant), who was in charge of MAG and MGI’s business transactions, disposed of fifty-seven paintings. After a trial, the Surrogate’s Court found that the paintings were sold for less than their actual value and both Reis and Stamos had a conflict of interest regarding the MAG and MGI contracts because Reis was employed by MGI as an executive and Stamos personally benefited as an artist by his involvement in the contracts. The court also found that Levine, although not personally conflicted, was negligent in allowing the conflicted transactions to proceed and the paintings to be sold below value. The court also found MAG, MGI and Lloyd guilty of contempt for selling the fifty-seven paintings. The court rescinded the conflicted contracts and held Reis, Stamos, MAG and MGI jointly and severally liable for damages in the amount of $9,252,000 which included appreciation damages calculated from the difference in the value of the paintings at the time of the court’s order. Since Levine had not acted in bad faith, the court held him jointly and severally liable for the lesser amount of $6,464,880, the difference in value of the paintings when MAG and MGI sold them. The Appellate Division affirmed the Surrogate’s Court’s order with a minor modification. The Executors, MAG and MGI appealed.
Rule of Law
Holding and Reasoning (Cooke, J.)
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