Gallery's Artworks Seized
Bank Removes Paintings After Judge Finds New York's Berry-Hill in Default

NEW YORK—Representatives of a lender seized artworks from Berry-Hill Galleries, a well-known American art specialist on Manhattan's Upper East Side, after a judge found the gallery had defaulted on a debt of $9.5 million.
As people from the gallery and the bank, American Capital Financial Services, congregated Tuesday on the first floor of the gallery's stately townhouse, handlers carried the artworks, primarily paintings, down the street toward Fifth Avenue, where they deposited them into two large moving trucks.


Seized in Manhattan


Noah Rabinowitz/The Wall Street Journal
Employees of Cirker-Hayes Fine Art and Antique Storage removed paintings from the Berry-Hill Galleries on East 70th Street in Manhattan Tuesday.

Berry-Hill's latest troubles come at a time when a number of New York galleries are struggling amid the recession. Nearly two dozen galleries in the city have closed amid the art-market downturn, including blue-chip spaces on the Upper East Side such as Salander O'Reilly Gallery and grittier warehouse spaces like Bellwether in Chelsea and Rivington Arms on the Lower East Side.

Overall, New York galleries were hit hardest by the recession, but contemporary galleries in other art capitals also suffered. By and large, newer galleries selling contemporary art have taken the hardest hit, because their rosters of artists are not as well known. Prices for contemporary art have also dropped sharply since the recession, unlike prices for some earlier artists.

In an interview Tuesday, the Berry-Hill gallery's chairman, James Berry Hill, denied that the works were being repossessed.
As workers from Cirkers Fine Art Storage & Logistics removed the art from his gallery, Mr. Hill said: "We're sending stuff to our warehouse" to make way for a new one-person show. When asked whether the artwork was being seized by the bank, Mr. Hill replied: "The word 'seized' is not a word I would use," adding that he found the term "draconian."
"We just had a meeting. We are negotiating to get this resolved," Mr. Hill said. He described the meeting as amicable, and added, "We are negotiating to pay the bank in full."
Reached by phone, a lawyer for American Capital, Geoffrey Potter, said he wasn't authorized to speak, and directed a reporter to the court file.

On March 30, U.S. District Judge Colleen McMahon granted American Capital's application for an order of seizure, finding that Berry-Hill owed the bank $9.5 million. After the bank informed Berry-Hill on Feb. 1 that it had defaulted on its loan, the gallery "secretly sold 223 works of art," according to the court decision, and hadn't paid sale proceeds to American Capital or held them aside for the bank.

Auditors sent by American Capital to Berry-Hill in February discovered that some art from the gallery, including 10 appraised paintings, 170 unappraised paintings, and 43 pieces of James Hill's personal artwork, had been sold for $300,000 to Jim's of Lambertville, in Lambertville, N.J. Reached in Florida, gallery owner Jim Alterman said the Berry-Hill gallery had sold him "mostly their lesser things. What I bought was what would be perceived as their junk. It's the kind of stuff that never sees the light of day from other galleries."
He said he has sold some of the works he bought from Berry-Hill.
The gallery filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code in 2005. It couldn't be learned if or when the gallery emerged from Chapter 11 proceedings. A lawyer for the gallery, Michelle Rice, declined to comment on questions about bankruptcy proceedings.
Some of the boxes bore labels such as "N.A. Brooks," "H. Frishmuth," and "B. West." Berry-Hill's inventory, according to the gallery's Web site, includes works by artists Nicholas Alden Brooks, Harriet Whitney Frishmuth and Benjamin West.
Among the other 19th and 20th century American artists the gallery has shown, according to its Web site, are Milton Avery, Mary Cassatt, William Merritt Chase and Winslow Homer.

Corrections & Amplifications: Art dealer Michael Hackett says that his Hackett-Freedman art gallery was in excellent financial shape when he and his partner chose to close it last year. A U.S. News article Wednesday on Berry-Hill Galleries in New York incorrectly said that Hackett-Freedman still sells art privately and that the gallery gave up its retail space because of the recession.