Statutes protecting artists who consign works to art dealers

Posted: February 19, 2015 By Krigel & Krigel

All highlighting and comments in red are by Steven J. Braun.

The following art consignment statute in Missouri expressly protects the rights of artists who deliver works of art to galleries and art dealers.  Please take note that this Missouri statute defines fine art very broadly, protecting a wider variety of art works than laws in some other states.  An artist should not assume they have similar protection when consigning works to galleries in other states. The need for a statute such as Missouri’s has become apparent in cases across the country where a gallery has declared bankruptcy.  Artists whose work was on sale at these galleries have had to argue that their works should not be an asset of the bankruptcy estate, subject to being sold to pay all creditors.  Sometimes an artist loses, and their art is sold to satisfy all creditors. In a recent Massachusetts case, the plaintiff artists prevailed even though there was no written statement of delivery which the statute requires the consigning artist prepare and submit to the consignee gallery.  MGLA Title XV, Chap. 104A, §2.(b)  See the discussion of Plumb v. Casey below.  It is a reasonable interpretation of Missouri’s statute that the absence of a written consignment agreement under section 407.902(2) will not undermine the protections created by other provisions of this law.

Missouri Art Consignment Statute

Revised Statutes of Missouri
Title XXVI. Trade and Commerce
Chapter 407. Merchandising Practices

Sale and Exhibition of Certain Works of Fine Art

407.900. Definitions

As used in sections 407.900 to 407.910:

(1) The term “art dealer” means a person engaged in the business of selling fine arts. The term “art dealer” does not include any person engaged exclusively in the business of selling goods at public auction;

(2) The term “artist” means a person who creates fine art or, if such person is deceased, such person’s heir, legatee, or personal representative;

(3) The term “consignment” means a transfer of the physical possession of fine art by the artist creating the fine art as consignor in which no title to, estate in, or right to possession of the fine art superior to that of the artist who is the consignor shall vest in the consignee, notwithstanding the consignee’s power or authority to transfer and convey the title, and all of the rights and interests of the artist who is the consignor in and to such fine art to a third person;

(4) The term “creditors” includes, but is not limited to, those persons included in the definition of “creditor” in section 400.1‑201;

(5) The term “fine arts” includes:

(a) Visual art such as paintings, sculptures, drawings, mosaics, or photographs;

(b) Calligraphy;

(c) Graphic art such as etchings, lithographs, offset prints, silk screens, and other works of a similar nature;

(d) Crafts, including any item made by an artist or craftsman through the use of clay, textiles, fibers, wood, metal, plastic, glass, ceramics, or similar materials;

(e) Works in mixed media such as collages or any combination of the art forms or media listed in paragraph (a), (b), (c), or (d) of this subdivision.

CREDIT(S)  (L.1984, S.B. No. 688, p. 694,  1.)

11 MO Practice Series V.A.M.S.  407.910 Form 1, Form 1. Petition for Damages to Artist for Violation of V.A.M.S.  407.900, et Seq.

407.902. Art delivered to art dealer for sale or exhibition deemed consignment, when, exception‑‑written contract required, contents

1. Notwithstanding any custom, practice, or usage of the trade to the contrary, whenever an artist delivers, or causes to be delivered, a work of fine art of the artist’s own creation to an art dealer in this state for the purpose of exhibition or sale, or both, on a commission, fee, or other basis of compensation, the delivery to and acceptance of such work of fine art by the art dealer from the artist shall constitute a consignment unless the delivery to the art dealer is pursuant to an outright sale for which the artist has received or receives, either prior to or upon delivery, full compensation for the work of fine art.

2. Whenever a consignee accepts a work of fine art from an artist for the purpose of sale or exhibition and sale to the public on a commission, fee, or other basis of compensation, there shall be a written contract or agreement between the artist who is the consignor and consignee which shall include, but need not be limited to, provisions that:

(1) The proceeds of the sale of the work of fine art shall be delivered to the artist who is the consignor at a schedule agreed upon by the artist who is the consignor and consignee;

(2) The consignee shall be responsible for the stated value of the work of fine art in the event of the loss of or damage to such work of fine art while it is in the possession of such consignee;

(3) The work of fine art shall only be sold by the consignee for an amount at least equal to the amount agreed upon by the artist who is the consignor in writing;

(4) The work of fine art may be used or displayed by the consignee or others only with prior written consent of the artist who is the consignor.

It is not clear whether the burden to provide the written agreement is on the artist, as the consignor, or on the gallery or dealer accepting the work, as the consignee.  However, based on a plain reading of this Missouri statute, and the 2014 Plumb v. Casey decision by the Massachusetts Supreme Court interpreting a similar Massachusetts statute, the balance of the Missouri provisions that the gallery holds the art and sale proceeds in trust for the consigning artist still protect the artist, even if there is no written consignment agreement or contract.  However, a written agreement is still the best practice for both parties.

407.904. Consignment, effect

A consignment of a work of fine art shall result in all of the following:

(1) The art dealer, after receipt of the work of fine art, shall constitute an agent of the artist for the purpose of sale or exhibition of the consigned work of fine art within the state of Missouri;

(2) The work of fine art shall constitute property held in trust by the consignee for the benefit of the artist who is the consignor and shall not be subject to claim by a creditor of the consignee;

(3) The proceeds from the sale of the work of fine art shall constitute funds held in trust by the consignee for the benefit of the artist who is the consignor, and such proceeds shall first be applied to pay any balance due to the artist who is the consignor, unless the artist who is the consignor expressly agrees otherwise in writing.

407.905. Art dealer is agent of artist‑‑work of art and sale proceeds held in trust for artist, not subject to creditor of consignee

A work of fine art received as a consignment from the artist who created the work of fine art shall remain trust property, notwithstanding the subsequent purchase thereof by the consignee directly or indirectly for the consignee’s own account until the price is paid in full to the artist who is consignor. If such work is thereafter resold to a bona fide purchaser before the artist who is consignor has been paid in full, the proceeds of the resale received by the consignee shall constitute funds held in trust for the benefit of the artist who is consignor to the extent necessary to pay any balance still due to the artist who is consignor and such trusteeship shall continue until the fiduciary obligation of the consignee to the artist who is the consignor with respect to such transaction is discharged in full.

407.907. Waiver of proceeds in trust by artist, requirements

An artist who is a consignor may lawfully waive the provisions of subdivision (3) of section 407.904 if such waiver is clear, conspicuous, in writing, and signed by the artist who is the consignor. No waiver shall be valid with respect to the proceeds of a work of fine art initially received “on consignment” but subsequently purchased by the consignee directly or indirectly for his own account. No waiver shall inure to the benefit of the consignor’s creditors in any manner which might be inconsistent with the rights under sections 407.900 to 407.910 of the artist who is the consignor.

407.908. Contracts, prior to August 13, 1984, not affected, exceptions

Sections 407.900 to 407.910 shall not apply to a written contract executed prior to August 13, 1984, unless either the parties agree by mutual written consent that sections 407.900 to 407.910 shall apply or such contract is extended or renewed after August 13, 1984. The provisions of sections 407.900 to 407.910 shall prevail over any conflicting or inconsistent provisions of chapter 400 affecting the subject matter of sections 407.900 to 407.910.

407.910. Violations‑‑punitive damage and costs authorized

Any art dealer or creditor of an art dealer who violates any provision of sections 407.900 to 407.910 with intent to injure shall, in addition to the payment of all other damages and costs owed by him, pay to the artist involved punitive damages in an amount as may be determined by law and reasonable attorney’s fees.


An artist can also file a notice of security interest or financing statement (a UCC-1 form) on art consigned to a dealer or gallery.  You should consult with an attorney before doing this.  In Missouri, a UCC-1 is filed with the Secretary of State.  See the discussion below concerning UCC financing statements and other statutes that protect artists.

Additional Laws Governing the Consignment of Works of Art

Uniform Commercial Code

State laws normally provide that a gallery’s creditors can seize consigned goods to pay for the gallery’s debts.  This is also true if the gallery or gallery owner files bankruptcy.  Then the trustee may sell all of the inventory.  Absent designation by statute that the art works are consignments, a gallery’s creditors may stand in line ahead of the artist, or in equal standing with the artist, depending on whether other security interests have been filed, and what type they are.  If there are funds left after higher priority creditors are paid, artists may receive some compensation for their art.  While some other provisions in the Uniform Commercial Code, or UCC, may protect artists in consignment arrangements (posting a sign or affixing a tag) without the filing of a financing statement known as a UCC-1, filing a UCC-1 is the best protection absent a statute specifically providing protection for works of art that are consigned.

If the gallery is located in Missouri or Kansas, an artist files a UCC‑1 form in the Secretary of State’s office for that state.  The Secretary of State is the central office designated by state law for filing financing statements. (K.S.A. 84‑9‑501; R.S.Mo. 400-9-501)  Some other states may require filing in the county where the gallery is located at the time of the art consignment.  In both Kansas and Missouri, UCC‑1 financing statements may be filed online.  Kansas uses a private company which provides the online service.  The links are as follows:

Missouri Secretary of State: http://s1.sos.mo.gov/UCC%5Cdefault.asp.

Kansas Secretary of State: https://www.accesskansas.org/eucc/index.html

Filing the UCC-1 creates a lien, which is a legal claim to the property, which will put you ahead in line to receive compensation outside of or in bankruptcy court.  If and when an artist’s work is returned, or sold and the proceeds delivered, the artist must remove the lien.  Without a statute in Kansas comparable to the Missouri’s Art Consignment statute, an artist in Kansas should consider requiring a written consignment agreement and filing a UCC-1 financing statement

The uncertainties and requirements attendant to filing financing statements, and the exposed position of artists if UCC financing statements are not filed, make the statutes which specifically protect artists who consign works to art dealers even more important.

State Consignment Laws

Separate and apart from the Uniform Commercial Code, many states have enacted specific art consignment statutes to protect artists from creditors seizing consigned goods in the case of the gallery’s bankruptcy or being seized by creditors who have a general lien on the inventory of the gallery.  These are:

Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Texas, Washington, and Wisconsin.

Many of these state laws contain a requirement that a written consignment agreement exists between the artist and the gallery.  The absence of a written agreement should not eliminate the protection of other portions of these state laws that state a work of art and the proceeds are held in trust for the artist.  See the discussion of Plumb et al. v. Casey above.  However, some state statutes specific to works of art still retain a requirement that an artist Agive notice to the public by affixing to such work of art a sign or tag which states that such work of art is being sold subject to a contract of consignment or by affixing a sign to a consignee’s place of business giving notice that some works of art are being sold subject to a contract of consignment.  This is an extra step, an extra burden not present in Missouri’s statute.

Not all pieces qualify as “art” under state consignment laws. Some states define “art” as only a painting, sculpture, graphic art drawing, or a print, but not multiples or duplicates.  Some states also exclude crafts in their consignment laws. Missouri’s definition, as set out above, is very broad, covering multiples and crafts.

A useful summary of state consignment laws is on the web site of the St. Louis Volunteer Lawyers and Accountants for the Arts.  http://www.vlaa.org/?view=Artist‑Gallery‑Consignment‑Statutes


Conclusion

Artists should consult with their attorney concerning how to best protect their works and enforce their rights.  An attorney can help you develop a standard consignment agreement, review a gallery’s consignment agreement, file a UCC-1 financing statement, or help you comply with a state’s requirement to give the public notice of the consignment agreement.  An attorney can file claims in bankruptcy cases, and advocate that the art works consigned to the bankrupt gallery or gallery owner are not part of the bankruptcy estate.


*This article is very general in nature and does not constitute legal advice. Readers with legal questions should consult with an attorney prior to making any legal decisions.

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