Mennella v. Kurt E. Schon E.A.I., Ltd. , 979 F.2d 357 ( 1992 )


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  •                  UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT
    No. 91-3394
    OPAL MENNELLA,
    Plaintiff-Appellant
    Cross-Appellee,
    versus
    KURT E. SCHON E.A.I., LTD., ET AL.,
    Defendants-Appellees
    Cross-Appellants.
    _________________
    No. 91-3747
    _________________
    OPAL MENNELLA,
    Plaintiff/Counterlaim
    Defendant-Appellee,
    versus
    KURT E. SCHON E.A.I., LTD., ET AL.,
    Defendants/Counterclaim
    Plaintiffs-Appellants.
    _________________
    No. 91-3857
    _________________
    OPAL MENNELLA,
    Plaintiff-Appellant,
    versus
    KURT E. SCHON E.A.I., LTD., ET AL.,
    Defendants-Appellees.
    Appeals from the United States District Court
    For the Eastern District of Louisiana
    (December 2, 1992)
    Before POLITZ, Chief Judge, SMITH and BARKSDALE, Circuit Judges.
    POLITZ, Chief Judge:
    In   these   consolidated   appeals,   the   parties   dispute   the
    ownership of a masterpiece painted by Sir Anthony Van Dyck.           Mrs.
    Opal Mennella complains of the district court's summary judgment
    dismissal of her claim of conversion and denial of sanctions; Kurt
    E. Schon, E.A.I., Ltd., et al., complain of the court's award to
    Mrs. Mennella of certain payments she made on the painting and of
    the dismissal of their claim of defamation.         Concluding that the
    question of ownership is controlled by basic principles of property
    and contract law as adopted and codified in the Louisiana Civil
    Code, and concluding that Schon's defamation suit is without merit,
    we affirm the district court except as relates to recovery of
    interest by Mrs. Mennella.
    Background
    This mise en scene began in the Spring of 1988 when Mrs.
    Mennella agreed to purchase a painting from Schon's New Orleans art
    gallery. She previously had purchased two paintings from Schon and
    had admired this piece on previous visits.        The painting, entitled
    "Princess Mary, Eldest Daughter of King Charles I, Mother of King
    2
    William III" by the Flemish Master Sir Anthony Van Dyck, was more
    than 300 years old.1   Princess Mary married William of Orange; it
    is their names which identify one of America's first and finest
    colleges. The purchase price was $350,000. Motivated to purchase,
    she paid Schon $50,000 with the $300,000 balance, according to the
    invoice, to be paid on June 1, 1988.
    The painting never left Schon's possession.     Mrs. Mennella,
    experiencing cash-flow problems, amicably secured an agreement to
    pay the balance over a six-month period.     By Christmas of 1988,
    however, she had managed to pay only an additional $90,000.      At
    that point she demanded authentication of the painting to be used
    to secure a loan to pay the balance of the purchase price.    Schon
    sent an expert's appraisal stating that the portrait was "one of
    five copies by Sir Anthony Van Dyck."2   Concerned that the portrait
    might be a counterfeit, Mrs. Mennella enlisted the aid of her
    attorneys who moved to void the sale and recover the sum paid.
    Acting through counsel, Mrs. Mennella repudiated the painting's
    value, refused to make further payments, and demanded return of the
    $140,000 paid.
    Schon responded by letter on April 25, 1989, a full year after
    the ostensible sale, that Mrs. Mennella should be satisfied with
    1
    Van Dyck is, after Rubens, the most prominent Flemish painter
    of the 17th Century. Under the appointment of King Charles I he
    served as "principal paynter in ordinary of their Majesties." It
    was during this period that Van Dyck was Knighted and presumably
    painted the portrait in question.
    2
    The appraisal was conducted in January of 1989.        The
    conclusion was confirmed by a Dr. Erik Larsen in March and reduced
    to writing in April of 1989.
    3
    the   authenticity   of   the     painting   after    receiving    a   second
    appraisal.    In that letter Schon demanded performance within five
    days, absent which he would be forced to place the painting back in
    the active sale stock of the gallery.               Mrs. Mennella made no
    apparent effort to reply or to enforce her rights under the
    contract.    She did not make or tender the agreed price or object to
    the time period in which Schon demanded payment.           Instead, she and
    her   attorneys   insisted   on    referring   to    the   contract    as   "an
    agreement to purchase" rather than as a sale, obviously seeking to
    distance her from ownership and the obligation to pay the balance
    of the purchase price.
    On May 2, 1989, Schon wrote Mrs. Mennella, informing her that
    he regarded her silence and inaction as a default and that he
    considered the sale canceled.       No money was refunded.        Instead, in
    September Schon offered to either refund $95,000, representing the
    consideration paid less $45,000 for the cost of authentication and
    commission paid to Schon's salesman, or to give Mrs. Mennella
    $140,000 in store credit.       Mrs. Mennella rejected both offers.
    Without Mrs. Mennella's knowledge, the painting was shipped to
    Christie's in London where, in November 1989, it sold for more than
    $1.4 million.
    The following month, unaware of the London sale, Mrs. Mennella
    filed the instant suit seeking recision of the sale and damages,
    claiming that she only agreed to buy the painting upon "proper
    authentication and verification." She complained that the painting
    she agreed to purchase was a fraud and was worth far less than she
    4
    had agreed to pay.3      Schon answered and counterclaimed, alleging
    defamation.   Informed of the London sale, Mrs. Mennella's attitude
    markedly changed.     Her lawyers, presumably somewhat chagrined,
    amended the complaint, claiming that the sale was complete from the
    start and, as a result, the painting was Mrs. Mennella's and the
    London sale constituted a conversion.4
    Based on the pleadings, depositions, and affidavits, the
    district court concluded that Mrs. Mennella, though entitled to her
    payments and interest from the day of her demand, was not entitled
    to the proceeds of the London sale.           Schon's counterclaim for
    defamation was rejected.      Mrs. Mennella apparently thought this
    claim to be frivolous and moved for sanctions against Schon for
    presuming to advance it.     The district court denied the motion for
    sanctions.    Both parties timely appealed.
    Analysis
    Sitting as an Erie court we are to apply the substantive law
    of Louisiana.   As an appellate court we exercise plenary review of
    the application of that law.
    The   controlling    principles   of   Louisiana   law   are   neither
    complex nor mysterious. This dispute is readily resolved by resort
    to its chronology. That the parties formed some manner of contract
    3
    In her original complaint, Mrs. Mennella claimed that she
    "made verbal demands in early 1989 which were followed by written
    demand . . . for the return of [her $140,000]."
    4
    The amended complaint sought to "amend her [complaint] to
    state that: Plaintiff is and has been the owner of the [portrait]."
    5
    on April 5, 1988 is not disputed.             Rather, the dispute concerns the
    more remote question of whether the painting belonged to Mrs.
    Mennella so as to lend credence to her claim that Schon's sale of
    the painting constituted conversion.5 We must first decide whether
    the contract supports her claim to ownership.6
    1.   The nature of the obligation
    Whether the contract provided for a present transfer of title
    depends on the objectively determined intentions of the parties.7
    If   the         sale   was   intended   to     be    contingent   on    adequate
    authentication          and   verification,    as    Mrs.   Mennella    originally
    claimed, or on the payment of the purchase price and tender of
    delivery, as the district court determined, then the obligation
    would have been "suspensive" under the Louisiana Civil Code.                  The
    5
    Conversion is a common-law tort recognized by Louisiana
    courts as a quasi-offense under Civil Code article 2315.   See,
    e.g., Holley v. Singletary, 
    464 So.2d 410
     (La. App. 1985).
    6
    Mrs. Mennella's claim to the proceeds flows from her right to
    the painting. That right is defined by the Civil Code and the
    contract. One must recall the boundaries of common-law conversion
    before applying it to the unique relation created by Civil Code
    sales. Conversion, as the action has evolved, is predicated on (1)
    the plaintiff's right to possession, and (2) the defendant's
    exercise of dominion or control over the goods which is in fact
    inconsistent with the plaintiff's rights. W. Page Keeton, et al.,
    Prosser and Keeton on the Law of Torts, § 15, at 92, 104-05 (5th
    ed. 1984). If the April contract transferred title and Schon was
    not within his rights to sell the painting, only then would he be
    liable in damages under a conversion theory. The key is whether
    Schon, based on Mrs. Mennella's conduct, had the right to sell the
    painting.
    7
    La. Civ. Code art. 2045 (West 1987); M.O.N.T. Boat Rental
    Serv., Inc. v. Union Oil Co. of Cal., 
    613 F.2d 576
     (5th Cir. 1980);
    Kuswa & Assoc., Inc. v. Thibaut Constr. Co., Inc., 
    463 So.2d 1264
    (La. 1985).
    6
    Code defines a suspensive obligation as one which is "dependent on
    an uncertain event."8      Article 2471 of the Code provides: "A sale,
    made with a suspensive condition, does not transfer property to the
    buyer, until the fulfillment of the condition."          If, on the other
    hand, the sale was not conditioned "on an uncertain event," then
    title would pass under article 2456 of the Code which provides:
    The sale is considered to be perfect between the parties,
    and the property is of right acquired to the purchaser
    with regard to the seller, as soon as there exists an
    agreement for the object and the price thereof, although
    the object has not yet been delivered, nor the price paid
    [emphasis added].
    After reviewing all relevant indicia of the parties' intentions, we
    conclude     that   they   did   not   intend   to   create   a   suspensive
    obligation.
    Because we do not have the luxury of a fully comprehensive
    written contract9 we must glean the intention of the parties from
    other sources.      The Civil Code commands our consideration of the
    "nature of the contract, equity, usages, the conduct of the parties
    before and after the formation of the contract, and of other
    contracts of a like nature between the same parties."10 We find the
    conduct of both parties, before and after April 5, 1988, to be
    instructive.
    8
    La. Civ. Code art. 1767.
    9
    A written contract is not required to accomplish a sale of a
    movable.   La. Civ. Code art. 2441.     Where the price or value
    exceeds $500, however, proof of the contract must be proved by at
    least one witness and other corroborating circumstances. La. Civ.
    Code art. 1846. The summary judgment record contains ample proof
    of the making of the contract.
    10
    La. Civ. Code. art. 2053.
    7
    It is clear that Schon regarded the transaction as a perfected
    sale, one not contingent on authentication or anything else.                       The
    day after Mrs. Mennella paid the gallery $50,000, Kurt Schon wrote
    to congratulate her on the "purchase of the painting."                        Equally
    telling, Schon immediately paid his salesman a substantial sales
    commission.11    The invoice was straightforward; it described the
    transaction as a sale without reference to any condition.                         There
    was only the notation of the initial payment, amount and due date
    of the balance, and identification of the portrait.
    Similarly, Mrs. Mennella never made any claim to a right to
    authentication    until       December,        when   she   was   facing   financial
    difficulties and already had paid $140,000 for the painting.                        We
    are mindful of and consider significant the fact that the parties
    had executed two similar contracts without any authentication
    requirement.     Though the present efforts to reverse an earlier
    position   may   be     the   cause   of       uplifted     eyebrows,   it   appears
    consistent with the original understanding and prior dealings.
    The district court found the sale to be conditioned on both
    the delivery of the painting and the payment of the purchase price.
    We find that this reading creates unnecessary tension with the
    literal language of article 2456 and fails to comport with the
    accepted civilian rubrics.
    Article     1767    defines      a    conditional       obligation      as   "one
    dependent on an uncertain event."               If the anticipated performance
    11
    Schon later sought to withhold this commission from the
    refund of Mrs. Mennella's payments.
    8
    were treated as an uncertain event virtually every bilateral
    contract would be a conditional obligation and venerable article
    2456 would be rendered meaningless. Indeed, if the performance was
    so "uncertain" as to create a conditional obligation, it would be
    nigh impossible to treat the exchange of promises as a contract.
    Louisiana courts long have recognized that the Civil Code does not
    allow the parties to condition the transfer of title on the payment
    of the purchase price.12 Instead, in credit sales, Louisiana courts
    consistently have held that when the parties consent and agree as
    to the price and the thing, title passes instanter.        So sayeth
    article 2456.
    Therefore we are compelled to hold that title to the painting
    passed to Mrs. Mennella in April of 1988.       We must now consider
    whether that title was divested prior to the London sale.
    2.   The execution of the duties under the contract
    In support of her claim of ownership of the painting, Mrs.
    Mennella seizes upon the transfer of title and would ignore all of
    her subsequent actions.     Legal title is not so barren a concept.
    The Civil Code clearly portends a transfer of title subject to the
    execution of the contract.     For example, the seller may wrongfully
    sell and deliver the object to an innocent third party who would
    acquire title, provided he has paid fair value.13         The seller
    12
    Haymon v. Holliday, 
    405 So.2d 1304
     (La. App. 1981).
    13
    The Code explicitly accommodates such a result: "The sale is
    considered to be perfect and the property is of right acquired to
    the purchaser with regard to the seller. . . ." La. Civ. Code art.
    9
    retains a security interest in the property14 pending tender of the
    purchase price and has the concomitant duty of due care towards the
    object.15        The seller has the right to put the buyer in default and
    to dissolve the contract upon the buyer's failure to perform, and
    under      certain        conditions     to   simply      regard   the    contract      as
    dissolved.16        That divestment is the principal issue presented by
    this appeal.
    Mrs. Mennella was obliged to carry her end of the bargain,
    timely         payment,    just   as    Schon      was   obliged   to    care    for   and
    ultimately         deliver    the      painting.         Mrs.   Mennella's      erroneous
    conclusion that the painting was not authentic caused her to
    repudiate the transaction, demand a return of her partial payment,
    and refuse to pay the balance due.                  This is a course of action she
    would have been entitled to follow had she been correct in her
    assumption.17        That assumption was not correct, however.                    Indeed,
    2456. See also La. Civ. Code art. 518 ("when possession has not
    been delivered, a subsequent transferee to whom possession is
    delivered acquires ownership provided he is in good faith");
    Yiannopoulos, 2 Louisiana Civil Law Treatise § 354 (1991).
    14
    La. Civ. Code art. 3227; C & A Tractor Co. v. Holland
    American Ins. Co., 
    445 So.2d 1286
     (La. App.), cert denied, 
    449 So.2d 1348
     (La. 1984).
    15
    La. Civ. Code art. 2468.
    16
    La. Civ. Code art. 2013. See e.g., Texala Oil & Gas Co. v.
    Caddo Mineral Lands Co., 
    152 La. 549
    , 
    93 So. 788
     (1922); Hay v.
    Bush, 
    110 La. 575
    , 
    34 So. 692
     (1903). Comment (a) of the 1984
    addition of article 2013 cites both opinions.
    17
    When both parties to a contract share a mistake of fact
    involving the essence of a party's consent "the granting of relief
    presents no problem."    La. Civ. Code art. 1949, cmt. (d); see
    generally, La. Civ. Code arts. 1948-50.
    10
    in forming her belief that the painting was a fraud she relied on
    an appraisal which clearly indicated that the painting was executed
    by Van Dyck. She received repeated assurances from the seller that
    he   would    perform,   accompanied        by   repeated     demands   for   her
    performance.       Further, from January to May she made no effort
    whatever     to   authenticate   the   painting     or   to    investigate    the
    credentials of the experts from whom she had received appraisals.
    Instead, through counsel, Mrs. Mennella made manifest that she had
    no intention of performing18 and demanded a return of her money,
    refusing a "net" refund or a full store credit.
    Whether she claims to have been exercising her right to
    receive adequate authentication under the contract, or an effort to
    18
    Counsel for Mrs. Mennella concedes that this is the weakest
    part of their argument: "that it appears as though she didn't want
    it."
    11
    enforce a warranty, there is no excusing Mrs. Mennella's express
    repudiation and continued refusal to perform after receiving two
    appraisals.       Mrs. Mennella comes before the courts burdened with
    the troublesome albatross of her repudiation.                    We may not ignore
    it.
    Mrs. Mennella now offers a somewhat tortured explanation of
    the legal significance of her failure to perform. Essentially, the
    argument turns on what she characterizes as Schon's failure to
    formally       accept    her    offer    to     rescind    the    contract.        Such
    obfuscation need not long detain us.                   That argument ignores the
    fact that Mrs. Mennella was in default by January of 1989, at the
    very        latest,   when     the    voluntary     extension      expired.        The
    communication from counsel refusing to proceed and demanding a
    refund cannot be construed as anything but a definitive refusal to
    perform.        The lamb of her so-called "offer to rescind" cannot lie
    peacefully beside the lion of her refusal to perform.                        The fact
    that she may have based her actions on a mistaken belief that the
    painting was not genuine19 does not change the character of her
    actions; failure to perform does not presuppose a fraudulent
    intent, only an inexcusable failure to do that which was promised.20
    If     accepted   at    face    value,    the   argument    by   counsel     for
    Mrs.    Mennella      would    stand    the   law   of    contracts     on   its   ear.
    Contracts bind persons to the assigned risks and benefits.                         Mrs.
    19
    Neither may her failure to receive what, by her estimation,
    was sufficient evidence of authentication -- a right she did not
    have -- serve as an adequate excuse for her failure to perform.
    20
    See generally, Robertson v. Buoni, 
    504 So.2d 860
     (La. 1987).
    12
    Mennella would blithely shift the benefits and the corresponding
    burdens as best suits her most immediate interests.           She may not do
    so.21
    We conclude that Mrs. Mennella's written communication through
    counsel      refusing   to   perform   may     justly   be   treated   as   an
    anticipatory repudiation22 and that her failure to pay the balance
    in the extended period allowed for same constituted an active
    repudiation of the contract.
    3.      Dissolution
    Dissolution of the contract would terminate Mrs. Mennella's
    property rights in the painting.            Indeed, this was the prayer of
    Mrs. Mennella's initial lawsuit.            The final question before us is
    whether Schon secured a dissolution before the London sale.
    When faced with Mrs. Mennella's refusal to perform Schon had
    three choices.        He could:   (1) sue to enforce performance or to
    secure a judicial dissolution; (2) continue to seek performance
    albeit in an untimely manner; and/or (3) put Mrs. Mennella in
    default and, if she failed to correct same, regard the contract as
    21
    La. Civ. Code art. 2055; see also Douglas Oil Tools, Inc. v.
    Demesnil, 
    552 So.2d 77
     (La. App. 1989) (representations which are
    relied upon to a party's detriment give rise to estoppel). See
    also Ranger Nationwide Ins. v. American Cas. Co., 
    658 F. Supp. 103
    ,
    108 (D. Del. 1987) ("A party who breaches a contract may not rely
    on the benefits of that same contract."), aff'd, 
    833 F.2d 306
    , 307
    (3d Cir. 1987).
    22
    Litvinoff, Law of Obligations in the Louisiana Jurisprudence,
    371 (2d ed. 1985) ("[A] situation that could be characterized as an
    anticipatory breach at common law can be regarded as an active
    violation of the contract in Louisiana.").
    13
    dissolved.
    Initially, Schon opted for the second choice; he invited
    untimely      performance.   Seeking    to   accomodate   Mrs.   Mennella's
    cash-flow problems, he agreed to a modification of the contract,
    extending the $300,000 payment from June until the following
    January.      He then provided two appraisals to assuage her voiced
    concerns regarding the painting's origin.23          Schon informed Mrs.
    Mennella she had five additional days to perform; otherwise he
    would have to consider the sale dissolved.           Finally, when Mrs.
    Mennella made clear that she would not perform, Schon gave her
    notice that he was treating the sale as canceled and was returning
    the painting to the active stock for sale.
    Recently, revisions to the Civil Code formally adopted a
    practice the Louisiana courts have long recognized: extrajudicial
    dissolution.24 Schon's letters were sufficient to put Mrs. Mennella
    in default, a prerequisite to dissolution by notice.25 We find them
    23
    There is some dispute as to when the Larsen appraisal was
    sent. It is clear, however, that it was sent by April when Schon
    still demanded performance.    Mrs. Mennella complains that this
    communication by Schon included a demand for two different prices,
    one which included interest and one for the contract price. In
    either event she refused to perform at any price and then waited,
    saying nothing after receiving Schon's next letter which informed
    her that the sale was dissolved; indeed, she was still seeking
    dissolution and disavowing ownership, as late as March, 1990.
    24
    Mrs. Mennella cites cases from the 1940s and 1950s suggesting
    that judicial dissolution was Schon's exclusive remedy. In light
    of much earlier precedents and the recent amendments to the Civil
    Code, we can hardly view those decisions as persuasive. See n.16,
    supra.
    25
    La. Civ. Code art. 1991. "An obligee may put the obligor in
    default by a written request of performance . . . or by filing suit
    for performance. . . ."
    14
    sufficient, under the circumstances, to dissolve the contract.
    The Civil Code provides that the obligee has a right, in
    certain     cases,   to   treat   the    contract    as   dissolved.26   The
    "unilateral, non-judicial dissolution provided for in the revised
    articles is not a novelty."27           Under the civilian tradition, the
    obligor must be notified of his default, given a certain time to
    perform, and warned that the contract will be considered dissolved
    if performance is not rendered.28            The time set must be reasonable
    according to the circumstances,29 and the breach must be substantial
    to justify the dissolution.30
    The Civil Code is not exhaustive in its description of the
    circumstances that will entitle the obligee "to regard the contract
    as dissolved" without litigation.            Because the pertinent articles
    are relatively new, the Louisiana courts have not yet expounded on
    the issue.      Whether a repudiation is sufficiently clear to allow
    dissolution without litigation undoubtedly will pose a difficult
    question in some cases.       Fortunately for this Erie court, this is
    not one of those cases. Schon prudently waited until Mrs. Mennella
    unequivocally refused to perform and demanded the return of her
    26
    La. Civ. Code art. 2013.
    27
    Litvinoff, supra, at 389.
    28
    Id.
    29
    La. Civ. Code art. 2015.
    30
    La. Civ. Code art. 2014.
    15
    money        before   notifying   her    of   the   default   and   dissolution.31
    Article 2013, when read in harmony with related articles, such as
    articles 201432 and 2018,33 allows extrajudicial dissolution where
    the obligee has received partial payment.                The Code makes clear,
    however, that the obligee is liable for the return of any partial
    payments unless he has a right to retain them.34
    Schon's notice is not rendered ineffective by his failure to
    simultaneously return the partial payments.              Article 2018 provides
    the obligor in default with an action to recover partial payments
    to the extent they exceed the damages incurred.                     Article 201335
    states that the obligee who regards the contract as dissolved has
    the right to pursue a remedy in damages.               The comments to article
    2015 (non-judicial dissolution by notice) likewise state that
    "[a]fter such notice is given, the obligor will be liable for any
    delay damages that accrue."             At the same time, the obligee is duty
    31
    If extra-judicial dissolution were not appropriate in this
    case we have difficulty conceiving of a case in which it would be.
    Such a result would be intolerable as litigation would have to
    result from every failed sales agreement to clear title.
    32
    The article allows dissolution where the obligor has
    partially performed but the part not rendered substantially impairs
    the obligee's interest.
    33
    That article provides: "If              partial performance has been
    rendered and that performance is of             value to the party seeking to
    dissolve . . ., the dissolution does            not preclude recovery for that
    performance, whether in contract or             quasi-contract."
    34
    See, e.g., La. Civ. Code art. 2018.
    35
    "In either case [judicial or non-judicial dissolution] the
    obligee may recover damages." La. Civ. Code art. 2013.
    16
    bound to mitigate his damages.36          We conclude that article 2013,
    when read in pari materia with other articles,37 allows the seller
    to regard the contract as dissolved and temporarily retain partial
    payments when the buyer is in breach.          The seller, of course, is
    limited in his actions by operation of article 1759, which provides
    that "Good faith shall govern the conduct of the obligor or obligee
    in whatever pertains to their obligation."38       Thus he may hold only
    the funds necessary to compensate for the loss he reasonably
    believes he will suffer.      Under the prevailing circumstances, we
    conclude that Schon's actions were reasonable and that they were
    executed in good faith.
    We hold that Schon validly dissolved the contract by notice of
    default after it became obvious that Mrs. Mennella would not
    perform.     Consistent therewith, we therefore hold that Schon had
    legal title to the painting when it was sold in London.
    4.   Schon's retention of the payments after the auction
    Next we must consider whether the district court erred in
    concluding that Mrs. Mennella was entitled to the return of her
    payments. Schon contends that the contract was merely an agreement
    to sell and that the presumption is therefore that the money
    advanced regardless of the timing, is forfeitable as earnest money.
    We have concluded that the contract was a perfected sale, thus
    36
    La. Civ. Code art. 2002.
    37
    La. Civ. Code art. 13.
    38
    See also La. Civ. Code. art. 1983.
    17
    Schon is only entitled to the money if he can prove injury from the
    breach.
    Equitable principles enshrined in the Civil Code will not
    allow Schon to retain the funds paid by Mrs. Mennella and yet
    resell the painting for a quadrupled sum.39 Mrs. Mennella is liable
    to Schon only for the damages she caused him; nothing more.40   Mrs.
    Mennella did not cause Schon any damages whatever; in fact, her
    failure to perform resulted in a magnificent legitimate windfall
    for Schon.41     Schon's argument that he could have profited further
    from holding the painting is pure speculation and is unworthy.
    Indeed, it is equally possible that the sale at Christie's resulted
    in a higher price than Schon ever could have received in his
    gallery in New Orleans.     We therefore conclude that Mrs. Mennella
    is entitled to the full return of her payments with legal interest
    from the date of the London sale of the portrait.
    5.   The remaining claims
    Finally, there is the matter of Schon's claim for defamation
    and Mrs. Mennella's corresponding motion for Rule 11 sanctions.
    Under Louisiana law, a successful defamation claim requires: (1)
    defamatory words; (2) publication to someone other than the one
    defamed; (3) falsity; (4) malice, actual or implied; and (5)
    39
    See La. Civ. Code art. 2018 (allowing recovery after
    dissolution where partial performance leaves the obligee unjustly
    enriched).
    40
    La. Civ. Code art. 1994.
    41
    Cf. La. Civ. Code art. 1995.
    18
    injury.42      The summary judgment record richly supports the district
    court's conclusion: there is no indication that Mrs. Mennella spoke
    the allegedly defamatory words;43 that Mrs. Mennella published the
    statements, if any, to a third party; that Mrs. Mennella did so
    with malice, express or implied; or that Schon suffered any injury.
    We therefore agree with the district court that the action, while
    not so meritless as to be sanctionable,44 is without merit.
    For the reasons assigned we AFFIRM in part and VACATE and
    REMAND in part for judgment assessing legal interest as set forth
    herein.
    42
    Borne v. New Orleans Health Care, Inc., 
    580 So.2d 1070
     (La.
    App.), writ denied. 
    586 So.2d 533
     (La. 1991).
    43
    Schon fails to bring to our attention any Louisiana case
    allowing the statements of an attorney to be attributed to his
    client for this purpose.
    44
    Of course the district court's decision not to impose
    sanctions is accorded great deference. See Sam D. Johnson, et al.,
    The Proposed Amendments to Rule 11: Urgent Problems and Suggested
    Solutions, 
    43 Baylor L. Rev. 647
    , 661-63 (1991) (discussing Cotter
    & Gell v. Hartmarx Corp., 
    496 U.S. 384
    , 
    110 S. Ct. 2447
    , 
    110 L.Ed.2d 359
     (1990) (requiring abuse of discretion review)). We
    find no reason to disturb the district court's exercise of
    discretion in this case.
    19