Milwaukee Auction Galleries, Limited v. Chalk

O. Roy Chalk (defendant) decided to sell part of his art collection. Chalk orally contracted with art dealers Milwaukee Auction Galleries, Limited (Milwaukee Auction) and Joseph Van Goethem (the art dealers) (plaintiffs) that each would be paid a 5 percent commission, to be paid by the buyer, if they presented a buyer for a piece Chalk wanted to sell and a sale was made. The contracts were nonexclusive, and Chalk would not let the art leave his apartment. The art dealers were concerned that Chalk would deal directly with interested buyers that the art dealers brought him. Chalk promised the art dealers that he would protect their commissions. The art dealers brought Morishita to Chalk’s apartment. Morishita was interested in a painting but thought the price was too high. One year later, a company Morishita controlled bought the painting for a lower price. The same scenario occurred with another painting. Chalk refused to pay the art dealers commissions on these sales. The art dealers sued Chalk for fraud and breach of contract. The fraud claim was based on Chalk’s promise to protect the art dealers’ commissions and on Chalk’s representation when the art dealers inquired about their commission for the sale of the second painting that the buyer was no one they knew so they had not earned any commission. The district court directed a verdict for Chalk on the claim of fraud. The art dealers appealed.