David Williams and Frank Hendrick
own 32 acres of land. In May 2017, they decided to sell it using an auction
process. Their advertisement required a non-refundable deposit of $5,000, balance
due in 14 days after the auction, with no financing contingencies.
John Janson attended the auction and
bid $35,000. Williams told Janson that $35,000 was the highest bid. However,
Williams informed Janson that the property would not be conveyed for that
amount.
So Janson sued Wiliams and Hendrick,
asking the Court for a Judgment of specific performance requiring transfer of
the land to Janson for $35,000. The trial court agreed with Janson and ordered
conveyance of the land to Janson, upon payment of $35,000.
Williams and Hendrick appealed.
On appeal Williams and Hendrick
argue that the trial court erred in categorizing the auction as “absolute.”
According to Williams and Hendrick, neither the advertisement nor the pre-auction
announcements explicitly identified the auction as absolute, so therefore the auction
remained with “reserve.”
Janson claims that the proper
approach is to review the conditions of the auction to determine if it is
absolute or not. In support of his position, Janson states that no minimum
price was ever identified.
The Appeals Court turned its
attention to the difference between the two types of auction. In an auction
with reserve, no offers are accepted unless the owner or its agent declares
that the auction is completed. Until that time, the property can be withdrawn.
Conversely, in an absolute
auction the property is sold to the highest bidder regardless of the amount of
the highest and last bid. Neither the owner nor the owner’s agent can withdraw
the property after the first bid has been received in an absolute auction. Nor
may they reject any valid bids or otherwise cancel the sale.
The advertised terms of an auction
dictate the type of auction that will be conducted. By default, an auction is
with reserve unless expressly made otherwise. As well, the owner or its agent
may make oral modifications and additions to the advertised terms before the
sale is opened for bids.
At trial Janson conceded that the
auction, as advertised, was an auction with reserve because the advertisement did
not state that it was an absolute auction. On appeal Janson instead focuses on
the pre-auction announcements made by Williams regarding payment of a $5,000
deposit and that the buyer has 14 days to conclude the purchase.
Williams never explicitly stated
that the auction was absolute or without reserve. Consequently, the Appellate
Court concluded that the auction was indeed made with reserve, allowing the
owners to withdraw or stop the process at any time.
Accordingly, no contract was formed
between the parties because of Williams’ rejection of Janson’s $35,000 offer.
The judgment of the trial court is reversed. Williams and Hendrick win; Janson
loses. See Williams v. Janson; Supreme Court of Virginia; Record No. 210972;
October 20, 2022: https://caselaw.findlaw.com/va-supreme-court/1972027.html.
Questions / Issues:
- It appears that the landowners elected to sell their property as a DIY auction, perhaps not fully understanding the risks inherent in doing so without a licensed auctioneer. Most States require education and licenses of auctioneers, perhaps to avoid exactly this type of problem.
- Although not stated in the case, one might wonder if the primary goal of the landowners was to avoid real estate brokerage and auctioneer fees. One could then wonder what the owners spent in attorney’s fees to defend this lawsuit and appeal it to Judgment reversal, five years later.
Stuart A. Lautin, Esq.*
* Board Certified, Commercial (1989) and Residential (1988) Real Estate Law, Texas Board of Legal Specialization
Licensed in the States of Texas and New York
Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.
