Round One of Hal Wallis Case : LACMA Loses Plea for Hold on Sale Funds

A state judge in New York has denied the Los Angeles County Museum of Art’s request for a court order freezing the $39.6 million sale proceeds from an art auction last week until a legal dispute over the funds can be resolved.

The museum contends that eight Impressionist paintings on permanent loan to the museum were fraudulently reclaimed by a foundation set up by the late film producer Hal B. Wallis. It had asked for a temporary restraining order blocking transfer of auction sale proceeds.

Justice William Davis, of the state Supreme Court--the trial level comparable to Los Angeles County Superior Court--denied the museum’s request at a Thursday morning hearing. However, Davis agreed to a second hearing to determine how the money will be held until the museum’s suit is settled.

Davis scheduled another hearing in the case for June 6 after attorneys for the museum, the Wallis foundation and Christie’s agreed late Thursday to establish a formal escrow account in which the sale proceeds will be held pending disposition of the case.

The museum had sought the restraining order to impound money generated by the May 10 auction sale of eight Impressionist paintings from Wallis’s collection that were removed from the museum in early January by the Wallis Foundation, headed by Wallis’ son, Brent.

The Los Angeles County Museum of Art filed its suit Wednesday in New York demanding award of the sale proceeds, commissions earned at the sale by Christie’s and a sum equal to the future appreciation of the artworks while the litigation is in progress. In New York, an attorney representing the Wallis Foundation said the organization would seek to have the county museum’s action dismissed on grounds that New York state courts have no jurisdiction.

The dispute centers on a document the museum contends is a binding set of written instructions by Wallis to his foundation’s trustees, signed two weeks before his death in October, 1986, stipulating that the paintings in question be turned over to the museum on permanent loan.

The document adds that, if the paintings are withdrawn, they must be displayed permanently at another publicly owned museum.

Jeff Glassman, a Los Angeles lawyer who is secretary of the Wallis Foundation, said Thursday that the signed letter of instruction was not legally binding on the foundation board. Glassman said the “museum understood that the loan of the paintings was not a gift and would be for an indefinite period of time.”

But, said Glassman, “there always remained the possibility that if the circumstances were such that, if the foundation believed it would be in the best interests of its charitable purposes to sell the paintings, it had that right.” Much of the dispute between the museum and foundation may depend on seven words in the instruction letter saying the loan was for “a definite or indefinite period of time.”

Loss of the Wallis collection was the second recent major blow to the Los Angeles County museum. In January, 1988, industrialist Armand Hammer withdrew an earlier commitment to donate $250 million worth of his own art collection and announced a plan to build his own museum in Westwood to house it.

Meanwhile, court documents emerged in a related case in federal court in New York that indicate that many of the same paintings from the Wallis collection figured in a bizarre series of events in 1980 and 1981. The episode was largely kept out of public view at the time, according to Jeremy Epstein, an attorney for Wildenstein & Co., Inc., a New York gallery that has emerged as a central figure in the new dispute.

According to court records in U.S. District Court in Manhattan, Wallis’ wife, former actress Martha Hyer, was allegedly fleeced by three “confidence men” in Los Angeles who eventually offered for sale to a gallery in New York City two of the paintings that figure most prominently in the new dispute.

The court pleadings identify the trio as Harold Pruett, Gerhard Whiffin and Rory Keegan. Harold Pruett eventually emerged, in 1986, as a central figure in a $5-million Los Angeles ponzi scheme and was convicted on fraud charges.

Martha Wallis, whom Hal Wallis wed in 1966, was the film producer’s second wife. His first wife, the mother of Brent Wallis, was actress Louise Fazenda, who died in 1962.

Wildenstein, the court filing contends, subsequently sold the pictures back to Wallis in exchange for a contract--now the subject of the federal court litigation in question--in which Wallis allegedly agreed to allow Wildenstein to sell off his art collection after his death.

Eventually, it was Wildenstein that learned of the existence of the disputed letter of instructions signed by Wallis and informed the museum of the document’s existence.

The Wildenstein court documents allege that, in 1980, Martha Wallis sought to borrow $1 million for purposes that were not stated at the time. Other court documents indicate that Mrs. Wallis had occasional financial problems. Wallis’s initial instructions setting up a trust in his name specify that, in the event of his death, any outstanding debts incurred by Martha Wallis be satisfied.

Martha Wallis, according to an attorney who has represented the Wallis family, resides in Santa Fe, N.M. Attempts to reach her were unsuccessful.

The Wildenstein court documents say that, in December, 1980, Mrs. Wallis turned over paintings, including works by Monet and Gauguin, to the three men and that the works were later used as collateral for loans without the knowledge of Hal Wallis.

Two paintings by Frederick Remington were eventually sold, the court documents indicate, but were later recovered by the FBI.

In January, 1981, the documents contend, two works that are involved in the new dispute were offered to Wildenstein by two men who claimed to represent Martha Wallis. The works are Claude Monet’s “Le Parlement, Coucher de Soleil” and Paul Gauguin’s “The Field of Derout-Lollichon,” a Brittany landscape. The Monet was sold in the Christie’s auction for $14.3 million. The Gauguin was given to the Los Angeles County museum in a separate transaction by the foundation in 1987 and remains on display there.

The Christie’s auction also included such works as Mary Cassatt’s “Mother, Sara and the Baby,” which went for $3.85 million, Monet’s “Asters,” which went for $9.35 million, Edgar Degas’ “Sur la Scene,” sold for $6.6 million, and a river view by Camille Pissarro, which brought $2.31 million.

Wallis, the court filings indicate, did not learn of the 1981 sale of the Monet and Gauguin works until after it had been completed, at which point the film producer tried to regain possession.

The Wildenstein court filings contend that it was in the confusion after the gallery purchased the two works in 1981--for $650,000--that the Wildenstein organization agreed to sell them back to Wallis in return for the agreement that Wildenstein would be the selling agent if the works were ever sold.

The gallery’s own filings indicate that Wildenstein held out in an attempt to keep the disputed artworks in a tug-of-war with the late film producer, who is perhaps best known as the producer of the 1943 classic “Casablanca.”

The status of that agreement eventually led Wildenstein to attempt unsuccessfully to block the May 10 Christie’s auction on grounds it had exclusive rights to act as selling agent for the Wallis collection.

Times researcher Charles Hirshberg in New York contributed to the reporting of this story.