On Dec. 8 Berry-Hill Galleries and its affiliate Coram LLC filed for bankruptcy protection in the Southern District of New York. Berry-Hill said it had taken the action to protect its business and customers while attempting to resolve disputes regarding a lawsuit filed in August by one of its lenders, ACG Credit Company, LLC, New
NEW YORK—On Dec. 8 Berry-Hill Galleries and its affiliate Coram LLC filed for bankruptcy protection in the Southern District of New York. Berry-Hill said it had taken the action to protect its business and customers while attempting to resolve disputes regarding a lawsuit filed in August by one of its lenders, ACG Credit Company, LLC, New York.
The ACG complaint alleges that Berry-Hill defaulted under a $20 million loan agreement. The dispute is tied, in part, to a group of works included in a May 19 auction of American paintings at Christie’s New York (see ANL, 6/7/05). According to the ACG charges, filed in the Supreme Court of the State of New York, Berry-Hill “entered into a series of disguised financing transactions and dealings that violated the loan agreement and double-pledged the collateral. . . . Defendants attempted to auction much of that collateral at a public auction while concealing the fact that Berry-Hill had owned the artwork.” Zachary Newman, attorney for ACG, declined to comment on the bankruptcy filing, citing pending litigation.
The May sale at Christie’s raised questions among a number of attending dealers and collectors who initially had been told that the works in question “were part of a consignment that was part of a divorce, and one or both of the parties wanted to bid on the property.”
In late June Christie’s released a statement saying the house had been misled about the consignment’s having originated from a divorcing couple. “We now have reason to believe that this was not the case,” the auction house said.
Subsequently Christie’s canceled the sales of the lots in question and still has possession of much of the property. “We have notified the interested parties that we are canceling the purchases made of property consigned by them to the May 19 sale,” the statement read. “Christie’s will continue to hold on to the pictures concerned and any of the proceeds until we receive instructions from the parties involved as to who is to receive them.” Christie’s declined to comment further on the matter or on the bankruptcy filing by Berry-Hill.
According to papers filed by Berry-Hill, the bankruptcy filings “result from a series of disputes with their lenders and with the auction house, Christie’s. . . . These disputes have interfered with Berry-Hill’s efforts to refinance the ACG loan agreement and have damaged its reputation in the marketplace. The Debtors seek bankruptcy protection to resolve these disputes and refinance their business under the protection of the Bankruptcy Court.”
The filing further notes that Christie’s heads the list of creditors to whom Berry-Hill Galleries owes money. The claim is listed at $14 million.
Berry-Hill Galleries was also sued, on Dec. 5, by Texas collector and philanthropist James McGlothlin, who is seeking a declaration that his shared financial interest with Berry-Hill in a painting is “not subject to a lien or other interest of any kind by any of the Defendants.”
The painting is George Bellows’ Kids. In May, the complaint states, McGlothlin entered into an agreement with Berry-Hill to purchase a 50 percent interest in Kids for $3.25 million.
In November, according to McGlothlin’s charges, he learned of the lawsuit against Berry-Hill by ACG Credit, along with the claim of a “security interest in all of Berry-Hill’s assets, including without limitation all artwork owned by Berry-Hill, including the Bellows and all proceeds from the sales thereof.”
McGlothlin is seeking a judgment stating that his “one-half interest in the Bellows is unencumbered by any other lien or other interest claimed by any of the defendants.”