Major Folk Art Pledged as Collateral; Hicks Peaceable Kingdom Up for Private Auction

by David Hewett

Ralph Esmerian, the Paris-born king of the American colored gemstone market, jeweler extraordinaire, and American folk art collector, who almost single-handedly provided the impetus for the American Folk Art Museum as it exists today with his gifts and promised gifts, is facing two lawsuits regarding loans.

Esmerian has defaulted on a $185 million loan, and the holder of that loan, Merrill Lynch Mortgage Capital, Inc., has petitioned the court to order sheriffs to spread throughout the Big Apple and "break open, enter, and search for the Jewelry Collateral" at all the addresses Esmerian is known to frequent.

In early February, Esmerian gave notice that his Edward Hicks masterpiece The Peaceable Kingdom (shown on pages 88 and 89 of American Radiance: The Ralph Esmerian Gift to the American Folk Art Museum) was to be removed from the museum and offered at Sotheby's in a private auction (see article below).

That fact shocked folk art aficionados, and in a follow-up, Maine Antique Digest discovered that a minimum of 30, and possibly more, Esmerian-given or -promised folk art objects at the museum were named as collateral for loans from Christie's. All are shown in American Radiance, the 2001 collaborative work by the museum and Esmerian.

Among that number is the striking portrait by Henry Folsom, Young Woman of the Folsom Family, used on the front dust jacket of the book. It and other Esmerian-owned objects at the museum, many of near-iconic status, are variously described as "gift" or "promised" in the book.

There are two active lawsuits on file with the New York State Supreme Court, one entered by Merrill Lynch Mortgage Capital, and the other, found buried deep within the documents filed in the Merrill Lynch suit, by Christie's. (When Esmerian purchased the celebrated jewel firm Fred Leighton in 2005, with stores in Las Vegas and elsewhere, Merrill Lynch was named as having a financial interest in the purchase.)

On January 2, 2008, Merrill Lynch filed its suit against Esmerian, stating that it had loaned him some $185.3 million in 1998 and thereafter, guaranteed with massive amounts of jewelry (1251 pieces total) pledged as collateral.

In that suit, Merrill Lynch states that it discovered that Esmerian had double-pledged some collateral, to them and to Christie's.

Esmerian confirmed the size of his debt to Merrill Lynch and stated in one document, "Merrill Lynch is owed approximately $185 million, but it has collateral of at least twice that amount so long as Merrill Lynch does not dispose of the collateral in a commercially reckless manner, as it has threatened to do."

Merrill Lynch has made no bones about the fact that it is planning to sell the Esmerian collateral at auction. That includes the material it already holds and that which it hopes to collect through the seizure warrant. It has not indicated which major New York City firm will get the future sale or sales.

Both Sotheby's and Christie's have tendered proposals for possible auctions, but Christie's offer revealed that more than jewelry was involved.

In the January 22 affidavit of senior vice-president Daphne Lingon of Christie's, on page 6, she stated: "On January 9, 2008, Christie's brought suit against Mr. Esmerian and R. Esmerian Inc. ("REI"). Christie's loaned nearly $25 million to REI secured by jewelry and fine art...and REI has failed to pay the balance owing to Christie's."

Esmerian contracted the loan in 1998 and evidently has paid it down during the intervening years. When Christie's filed the suit against him on January 9, 2008, the principal due was $7,752,594.10, plus interest.

In a memorandum dated January 23, 2008, Merrill Lynch's attorneys took note of the Christie's lawsuit: "On January 8, 2008, Esmerian and REI were named as defendants in a $7 million lawsuit brought by Christie's due to REI's default on a loan agreement...," and "based on discussions with Christie's counsel, it appears that defendants, through Esmerian, pledged the same collateral to both Merrill Lynch and Christie's."

Jewelry is the bulk of the collateral pledged to Christie's. The non-jewelry security in the Christie's loan appears in a number of allonges (additions to legal documents when no space remains on the original) buried within 300- and 400-page lists of collateral. (See below for some examples on those lists. The Peaceable Kingdom painting wasn't included on any loan collateral list.)

Toby Usnik of Christie's said he couldn't comment on any suit that was ongoing, but he did say he'd relay our questions about the Esmerian folk art to others there. We were still waiting for answers from the American Folk Art Museum at deadline.

Helen Chaitman, Ralph Esmerian's attorney, answered with a flat "No" when asked point blank if the other Esmerian-given objects at the museum were in danger of being pulled and/or sold at auction.

The situation is still a bit muddy at present because on the long lists of collateral for the Christie's loan the museum objects are listed as "pledged to Christie's as collateral" or as "delivered to and received by Christie's as collateral."

The Erastus Salisbury Field Portrait of a Young Man (probably William Lauriston Cook), circa 1838, shown on page 63 of American Radiance, falls in the latter category. That portrait was supposedly "delivered to and received by Christie's" under a loan agreement dated May 26, 1998, yet it appears on page 63 of the first printing of American Radiance in 2001, in which everything is supposed to fall under the umbrella of "a gift" of Ralph Esmerian.

Chaitman's answer calms the situation, but Esmerian appears to acknowledge the seriousness of the danger that collateral pledged to note holders, at Merrill Lynch and at Christie's, faces.

The January 10, 2008, affidavit presented to the court contains the following: "While Merrill Lynch has no interest in preserving the value of the collateral, obviously I and the beneficiaries of my estate, the American Folk Art Museum and the Groton School, have a great interest in assuring that the collateral realizes its full value.

"My collection comprises the core of the Museum's collection. I am unmarried and my will provides that the assets of my estate will be divided between the American Folk Art Museum and the Groton School," and "again, my goal is to sell the collateral in a way that will maximize the proceeds realized so as to enhance the amount of the collateral which will remain in my estate for the benefit of the American Folk Art Museum and the Groton School."

Some questions remain unanswered. What is the difference between the collateral listed in the Christie's suit and other material at the museum? How is The Peaceable Kingdom different from other objects appearing in American Radiance?

-The Collateral

This abbreviated list of objects was offered as collateral in the allonges to the Christie's loan agreement. It has been cross-checked with the folk art objects appearing in American Radiance. The page number given is the page where it appears. Some titles differ slightly from what the book lists.

All of the following material appears in the Christie's loan agreement under the heading "Additional property delivered in consideration of additional loan made to R. Esmerian Inc. pursuant to that certain secured promissory note and loan agreement dated May 26, 1998, between R. Esmerian Inc. and Christie's Inc."

Allonge 12, August 7, 1998:

Henry Folsom, Portrait of Anna Gilman Folsom, oil on canvas, the book's cover illustration and appears on page 29.

Sussell-Washington Artist, Laedy Washington, watercolor, page 234.

Needlework picture by Ruthy Rogers, page 293.

Joseph Warren Leavitt, Lafayette at John Leavitt's Tavern, watercolor, page 47.

Carved walnut figure of George Washington, page 351.

Joshua Bussell, View of Alfred, Maine Shaker Village, watercolor, page 311.

David Kulp (Culp), fraktur of a double eagle, page 224.

Allonge 18, May 23, 1999:

Edward Hicks, Residence of David Twining, page 90.

Allonge 21, August 17, 1999:

Carved and painted figure, Flora, page 360.

Jacob Maentel, Double Portrait of Danner Sisters, page 33.

There are also other objects listed in the allonges that may be listed for the museum, including a Johannes Spitler painted corner cupboard, John Bell earthenware animals, a Dentzel carousel rabbit, Schimmel eagles, sgraffito plates, weathervanes, furniture, and fabric items.

Hicks Peaceable Kingdom Up for Private Auction

by Lita Solis-Cohen

The Peaceable Kingdom by Edward Hicks (1780-1849) is up for auction at Sotheby's in a private sale. According to sources familiar with the sale, the minimum bid at this private auction is $10 million and must be delivered to Sotheby's by February 22.

Sotheby's folk art specialist Nancy Druckman would not confirm the figures or the date but did confirm that a client had asked Sotheby's to sell the picture.

Since 1976, the painting has been in the collection of New York gem merchant Ralph Esmerian, who bought it from Kennedy Galleries in New York City. It is the cornerstone of Esmerian's collection, promised as a gift to the American Folk Art Museum. It was included in several recent shows at the museum and at other museums. It is illustrated in nine books. Esmerian had no comment and referred questions to the American Folk Art Museum.

The oil on canvas, 26" x 29 3/8", was painted in Newtown, Bucks County, Pennsylvania, by Hicks, a Quaker preacher, between 1846 and 1848. It is considered the finest example of the artist's later Kingdoms.

Its composition differs significantly from his earlier versions in its almost square format and the dispersal of the animals throughout much of the landscape; they are no longer gathered close together.

Hicks scholar Caroline Weekley suggests Hicks may have been symbolizing the further divisions occurring between the Hicksite and Orthodox Friends. Similarly, the resigned facial expressions of the lion and leopard lack the fierceness and energy seen in Hicks's earlier versions, especially those created in the 1830's. The painting may be seen in American Radiance: The Ralph Esmerian Gift to the American Folk Art Museum, pages 88 and 89, number 54.

Susan Flamm, public relations director at the American Folk Art Museum, said, "The painting is owned by Ralph Esmerian. Ralph Esmerian has decided to put the painting up for a private sale, and the details of the process are confidential. The museum is among the parties being approached in the sale of the painting." Flamm declined to comment further.

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