New York's Arts and Cultural Affairs Law Protects Artists in a Volatile Economy
One way that the New York legislature has attempted to protect unwary artists is through the enactment of the New York’s Arts and Cultural Affairs Law Section 12.01.[1] This statute is particularly relevant in today’s uncertain economy because it prohibits an art merchant from taking a security interest in an artwork that is loaned to the merchant by the artist, thereby prohibiting the artworks from being subject to the claims of the merchant’s creditors, in the event that the merchant goes out of business and/or files for bankruptcy protection.
The statute provides, in part:
1. Notwithstanding any custom, practice or usage of the trade, any provision of the uniform commercial code or any other law, statute, requirement or rule, or any agreement, note, memorandum or writing to the contrary:
(a) Whenever an artist or craftsperson, his heirs or personal representatives, delivers or causes to be delivered a work of fine art, craft or a print of his own creation to an art merchant for the purpose of exhibition and/or sale on a commission, fee or other basis of compensation, the delivery to and acceptance thereof by the art merchant establishes a consignor/consignee relationship as between such artist or craftsperson and such art merchant with respect to the said work, and:
(i) such consignee shall thereafter be deemed to be the agent of such consignor with respect to the said work;
(ii) such work is trust property in the hands of the consignee for the benefit of the consignor;
(iii) any proceeds from the sale of such work are trust funds in the hands of the consignee for the benefit of the consignor.
For example, in Zucker v. Hirschl & Adler Galleries, Inc., 170 Misc.2d 426, 648 N.Y.S.2d 521 (Sup. Ct., N.Y. Co. 1996), the Court granted partial summary judgment for the plaintiff-artist Joseph Zucker on the basis that the statute expressly precluded the claim by the defendant art gallery that Zucker’s works were subject to the gallery’s security interest.
In plain terms then, in the event of the merchant’s bankruptcy, under New York’s law, an artist’s work should not be subject to the claims of the merchant, the merchant’s estate, or its creditors. Not all states, however, may protect artists the way New York does. If you are an artist, you should find out what state’s law applies to you before consigning your work, and whether or not your works will be protected.
[1] An “Artist” is defined in Arts & Cultural Affairs Law § 11.01 as a “creator of a work of fine art.” The definition of “Art Merchant” is also found in Arts & Cultural Affairs Law § 11.01(2), and is defined as a “person who is in the business of dealing, exclusively or non-exclusively, in works of fine art.” The term "art merchant" includes an auctioneer who sells such works at public auction. N.Y. Arts & Cult. Aff. Law § 11.01(2).
