Looking back at the Estate of Rothko

Mark Rothko died testate on February 25, 1970 leaving an estate consisting primarily of 798 paintings. Within three weeks, the co-executors of his estate, Bernard J. Reis, Theodoros Stamos, and Morton Levine hastily executed 2 contracts disposing of the majority of the paintings. Rothko’s daughter (Kate) and son (Christopher), in addition to the Mark Rothko Foundation, Inc. (a charitable beneficiary), instituted proceedings to remove the executors, rescind the contracts, return the unsold paintings, and damages for breach of fiduciary duties.

Generally, the executor of an estate must act with honesty, impartiality, and diligence. Reis was the director and owner of MNY, an art gallery which had a previous contract to sell Rothko paintings. This dual position, sales person and executor, created a situation which he could not impartially face. In fact, Reis endeavored to sell the works to his MNY gallery at 50% commission (the previous commission was 10% while Rothko was living). Stamos, in an apparent effort to curry favor with MNY, acquiesced to the sales and, “placed him[self] in a position where his personal interests conflicted with those of the estate.” The court further noted, “Stamos acted negligently and improvidently in view of his own knowledge of the conflict of interest of Reis.” The third co-executor, Levine, likewise breached his duty,

while not acting in self-interest or with bad faith, nonetheless failed to exercise ordinary prudence in the performance of his assumed fiduciary obligations since he was aware of Reis’ divided loyalty, believed that Stamos was also seeking personal advantage, possessed personal opinions as to the value of the paintings and yet followed the leadership of his co-executors without investigation of essential facts or consultation with competent and disinterested appraisers…

The court held, in part, “an executor who knows that his co-executor is committing breaches of trust and not only fails to exert efforts directed towards prevention but accedes to them is legally accountable,” and affirmed the lower court’s decree of appreciation damages against them.