Hammer Hits Snag in Reclaiming Collection : Art: Sotheby’s balks at releasing appraisal of works donated to USC without assurance from Armand Hammer that he won’t sue.

A proposal by industrialist Armand Hammer to buy back an art collection he donated to USC 25 years ago has run into a new obstacle--action by Hammer to block a USC-commissioned appraisal of the materials.

In a letter filed with the California attorney general’s office several weeks ago, Hammer said he wanted to get the paintings back to bolster his museum’s permanent collection. The Hammer museum, under construction in Westwood, is scheduled to open Nov. 28.

Frank Ashley, a Hammer spokesman, denied on Thursday that negotiations with USC were at a standstill. “I understand that that’s not the case,” Ashley said of the reported action by Hammer blocking the appraisal. “It’s our understanding that the negotiations are going on.”

The repurchase proposal--first disclosed last January--was so unusual in art museum circles that USC demanded approval from the attorney general’s office before agreeing to discuss it. The approval permitted Hammer and USC to retain separate appraisers to agree on a purchase price for the collection, which boasts a handful of important paintings, but also includes a larger body of lesser work--much of it by students of Old Master painters.

When USC retained the New York office of Sotheby’s to undertake the university’s appraisal, however, Hammer reportedly balked at a request that he issue a letter guaranteeing not to sue the auction house if a dispute arose over the fair market value of the artwork. Without the letter, Sotheby’s has declined to turn over its findings to USC, according to sources familiar with the situation.

The step by Hammer had the effect of bringing an abrupt halt to the buy-back deal and rekindling a dispute between Hammer and the university over Hammer’s refusal to return two paintings he borrowed back from the collection several years ago. It was learned that USC officials, including university general counsel Christian Markey, were reconsidering plans--abandoned when USC decided to agree to Hammer’s repurchase proposal--to resort to legal action to regain possession of the two paintings, “Venus Wounded by a Thorn” and “The Nativity,” both by the 17th Century Flemish painter Peter Paul Rubens.