In that case, the basic issue was whether the artwork could be detained during an investigation as to whether it is stolen property

"Dead City II" is being claimed by the heirs of Fritz Grunbaum, who died at Dachau, and "Portrait of Wally" is claimed by the family of Lea Bondi, a gallery owner who fled Austria when it was annexed by Germany in 1938.

Customs seized "Portrait of Wally," for which, sources said, the Bondi heirs had the stronger claim of the two cases. A warrant for "Dead City II" may follow.

The impressionist paintings had been on loan to New York's Museum of Modern Art when the Grunbaum and Bondi heirs filed claims.

The museum declined to detain the paintings, arguing that it was bound by contract to return them to the lender, the Austrian-financed Leopold Foundation. It also contended that seizure of the paintings by the district attorney would harm American cultural life by impairing museums' ability to borrow artworks for exhibition.

A federal magistrate issued a warrant for "Portrait of Wally" on Tuesday of last week after Customs found "probable cause" that, under Austrian law, it was stolen property. Therefore, it was considered contraband that was illegally imported into the United States, said a source in the district attorney's office.

The Customs seizure "sends a message that the United States government is going to act vigorously when it believes that property that has been stolen comes into the United States," said Manhattan attorney Lawrence Kaye, who represents the Bondis.

MOMA, which is not a party in the federal action, said it was "deeply disappointed" by the seizure.

The case to determine ownership will be heard in a civil proceeding in federal court in Manhattan at a future date.