Posts Tagged ‘estate sale’

Purchase At Tucson Estate Sale Generates $574,730 Profit

NOVEMBER 6, 2000 VOLUME 8, NUMBER 19

“Estate sales” are a popular American pastime. After the owner’s death or disability, personal effects may be offered for sale to the public, and bargain hunters love to poke through the merchandise. Some shoppers are hoping to find a perfect match for their own dishes, some are looking for quaint period pieces, and some are looking for treasures unknown to the estate sale organizers.

When Martha Nelson died in Tucson in 1996, she left a household of personal items, furniture and artwork. Among her possessions were two oil paintings of flowers. Nothing indicated that there was any particular value to those two paintings, and no one realized they might be valuable.

The personal representatives of Ms. Nelson’s estate decided that her household goods should be offered for sale, and they contacted a Tucson appraiser to help them organize and price the items. Although the appraiser made it clear that she did not appraise fine art, neither she nor the personal representatives thought it necessary to secure additional appraisals of the paintings. They were included in the estate sale, and Carl Rice bought both for a total of $60.

At home with his estate sale buys Mr. Rice compared the signatures on the paintings to samples in an art book. He thought maybe he had stumbled onto paintings by Martin Johnson Heade, a notable American Hudson River School Painter who died in 1904. He ultimately turned out to be right; the paintings were “Magnolia Blossoms on Blue Velvet” and “Cherokee Roses.” Mr. Rice then sold his two paintings at auction through Christie’s in New York for a total of $1,072,000.

When the personal representatives of Ms. Nelson’s estate learned of the sale, they brought suit against Mr. Rice to recover the value of the paintings. They argued that the purchase was the result of a mutual mistake between the parties, and that the purchase price of $60 was simply unconscionable. The trial judge dismissed the complaint and Ms. Nelson’s estate appealed.

The Arizona Court of Appeals upheld the dismissal of the lawsuit. The personal representatives had relied on someone who was “admittedly unqualified to appraise fine art,” and they therefore “consciously ignored the possibility that the Estate’s assets might include fine art.” That, according to the Court of Appeals, meant that Ms. Nelson’s estate had assumed the risk of any mistake, and Mr. Rice would be allowed to benefit from the mistake.

As for the argument that the low purchase price was unconscionable, the Court of Appeals noted that the price was set by the estate and that Mr. Rice paid it without negotiation. While the result might seem unconscionable to the estate in hindsight, it was not unconscionable at the time of purchase. Estate of Nelson v. Rice, October 31, 2000.

Mr. Rice may have been the year’s (and perhaps the decade’s) best bargain-hunter. After income taxes and commissions on the sale, he and his wife realized $574,790 from his $60 investment.

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