Internet entrepreneur Halsey Minor, who declined to pay for the painting and other works, now faces a huge financial penalty.
Minor had filed his two suits against Sotheby's on September 2008 in reply to the auctioneer's legal request for payment for Peaceable Kingdom with the Leopard of Serenity by Edward Hicks and works by Andy Warhol and Childe Hassam. Minor claimed that "Sotheby's actively conceals information concerning its own economic interests in property it places at auction" and that "Sotheby's intentionally deceives its clients into bidding more for auctioned property than they otherwise would have, and more than Sotheby's believes the property to be worth".
It was an open secret that the 'vendor' of the Peaceable Kingdom was troubled jeweller and folk art collector Ralph Esmerian who - while promising the picture to the American Folk Art Museum that houses much of his collection - had also pledged it to Sotheby's as collateral for a loan that was not repaid.
When Sotheby's failed to find a buyer by private sale, it was entered for sale in a specialist American pictures auction in New York on May 22, 2008 with a $6m-8m estimate. It sold to Minor's premium-inclusive bid of $9,673,000, a record for Hicks and for American folk art.
Court papers state that Minor was not told - personally or in the auction catalogue - that Sotheby's had an interest in the Peaceable Kingdom over and above the normal vendor-auctioneer relationship. Disclosure of an interest in a lot is required by New York City law and is typically denoted by a symbol (in Sotheby's case a triangle) next to the lot number in the catalogue with an explanation of its meaning in the conditions of sale.
Minor, who sought to have his countersuit designated as a class action, says it is was for this reason that his bill remained unpaid, but Judge Barbara S. Jones found on March 30 that "none of Minor's arguments have merit". She ruled that the dotcom entrepreneur should pay the auctioneers the difference between the price he had bid at auction and the sums they subsequently realised for the disputed works of art in later sales.
Court records state that in February this year Sotheby's resold Peaceable Kingdom with the Leopard of Serenity privately for $7m. The court ruled that Minor owes Sotheby's the balance of $2,673,000.
The two other pictures in the case were resold at auction.
Minor also owes Sotheby's $82,500 in the matter of Diamond Dust Shoes by Andy Warhol. He bid $301,000 for it on May 15, 2008. It resold in May 2009, for $218,500.
Carriage in Winter (or Paris, Winter Day) by Childe Hassam, for which Minor bid $3,961,000 on May 2008, was also resold in May 2009, for a considerably smaller sum - $2,322,500.
The judge again ruled that Minor must pay the difference, in all three cases totalling $4,394,000. A further $2,245,851 in "pre-judgment interest and late charges" bring the total to more than $6.6m. Minor has 30 days from the date of the judgment (March 30) to appeal.
Last June Christie's launched legal action against Minor for breach of contract after he failed to pay for three major works he bid for successfully at auction, also in his spending spree of May 2008. Including premium, the three works - a Van Dyck, a Stubbs and a Stringer - should have cost Minor more than $7m, but Christie's have accused him of bidding when he knew he did not have the wherewithal to pay for them.
Minor, the co-founder of Cnet, also faces a $13m bill from the state of California over unpaid personal income tax.
Following a seperate court action, Phillips de Pury have been appointed to sell pieces from Minor's collection of contemporary art in New York in May and June.
By Roland Arkell