Alex Lyon & Son v. James R. Leach ( 2020 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2020 Term
_______________ FILED
June 15, 2020
No. 18-0383 released at 3:00 p.m.
_______________ EDYTHE NASH GAISER, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
ALEX LYON & SON,
SALES MANAGERS & AUCTIONEERS, INC.,
Defendant Below, Petitioner
v.
JAMES R. LEACH,
Plaintiff Below, Respondent
________________________________________________________
Appeal from the Circuit Court of Wood County
The Honorable Jason Wharton, Judge
Civil Action No. 17-C-110
AFFIRMED
________________________________________________________
Submitted: February 19, 2020
Filed: June 12, 2020
George J. Cosenza, Esq. Matthew C. Carlisle, Esq.
Cosenza Law Office Theisen Brock
Parkersburg, West Virginia Marietta, Ohio
Counsel for the Petitioner Jeffrey B. Reed, Esq.
Parkersburg, West Virginia
Counsel for the Respondent
JUSTICE HUTCHISON delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. When real or personal property is sold in an auction with reserve, the
auctioneer (as agent of the seller) invites offers from successive bidders which the
auctioneer may accept or reject until the auctioneer announces the completion of the sale.
A bid is the equivalent of an offer to buy the property, and no contract is formed until the
auctioneer manifests final acceptance of the bid. In an auction with reserve, the property
will not be sold unless the highest bid is equal to or exceeds a minimum price.
2. When real or personal property is sold at an auction, the sale is
presumed to be with reserve unless the seller announces that the property is to be sold
without reserve.
3. When real or personal property is sold at an auction without reserve
(also called an “absolute auction”), the auctioneer (as agent of the seller) makes an offer to
sell at any price bid by the highest bidder, and the offer is accepted and a contract is formed
with each higher bid placed by a buyer. Once the auctioneer calls for bids, the property
cannot be withdrawn from the auction. In an auction without reserve, the property will be
sold to the highest bidder and no minimum price or other condition will limit bidding.
4. The seller of property sold at auction may prescribe, within reasonable
limits, the terms and conditions of the sale.
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5. A bidder at an auction is generally bound by the published or
announced terms and conditions of an auction, even if the bidder did not see or hear those
terms and conditions.
6. When a seller (or the seller’s agent, the auctioneer) establishes terms
and conditions for an auction of property in an advertisement or publication prior to an
auction, those terms and conditions are thereafter binding upon both the seller and any
bidder. Any bid placed at the auction incorporates those terms and conditions unless there
is an effective modification.
7. As a general principle, all the bidders at an auction must stand upon
an equal footing. Accordingly, an auctioneer cannot vary the announced terms of the sale
as to some bidders or any one bidder to the detriment of the other bidders.
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HUTCHISON, Justice:
In this appeal from the Circuit Court of Wood County we examine a narrow
and complex question: how is a contract formed in an auction? This question is one of
first impression in West Virginia.
As we discuss below, the circuit court properly construed the law of auctions
and contracts. Because there are no genuine issues of material fact in the record below,
and inquiry concerning the facts will do nothing to clarify the application of the law, we
find that the circuit court correctly granted summary judgment to the plaintiff and denied
summary judgment for the defendant.
I. Factual and Procedural Background
This appeal involves the auction of a plot of land in Vienna, West Virginia.
The defendant, Alex Lyon & Son, Sales Managers & Auctioneers, Inc., advertised and
conducted the auction of the property. The plaintiff, James R. Leach, was the high bidder
at the auction.
The parties agree that the defendant placed several advertisements for the
sale of the property, in writing and online, and described the auction as an “absolute sale”
with a minimum opening bid of $200,000. The defendant’s advertisements contained
“terms and conditions” that required prospective buyers to make a 10% deposit before
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being allowed to place a bid on the tract. 1 The defendant also created an “Auction Catalog”
with terms and conditions that contained a similar requirement: that prospective bidders
must first provide “Cash or [a] Company Check” of the 10% deposit before bidding.
Furthermore, the terms and conditions in the pre-auction advertisements and catalog
required prospective bidders to provide a “Bank Letter of Guarantee” made payable to the
defendant to ensure payment of the balance of the proceeds if the bidder was successful at
the auction. Additionally, the pre-auction advertisements and catalog required that, before
bidding, bidders must sign a “Bidders Registration Agreement” that bound them to the
terms and conditions of the auction. Lastly, the advertising and catalog provided that the
terms and conditions of the auction could be modified only by a statement made at the
auction.
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The defendant scheduled the auction of the property to begin at 1:00 p.m. on
May 21, 2016. The plaintiff arrived at the auction site early and waited. At about 12:50
p.m., the plaintiff approached the bidder’s registration table and spoke to an employee of
the defendant. When questioned, the employee confirmed to the plaintiff that no bidders
The advertising noted that the defendant was auctioning “3.273 acres vacant
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land” with 315 feet of river frontage located at #1 17th Street, Vienna, West Virginia. The
advertisements specifically stated, at the top and in bold lettering: “Absolute Sale,
Minimum Opening bid $200K (10% Deposit Required to Bid).”
For example, an online advertisement for the property advises bidders to
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examine the printed terms and conditions but provides that “STATEMENTS MADE DAY
OF SALE SUPERSEDE PRINTED MATERIAL.” The record is clear, however, that the
defendant made no statements at the auction.
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had made a deposit or otherwise qualified to bid on the property. In reliance upon that fact,
the plaintiff delivered to the defendant’s employee a signed bidder’s registration
agreement, a copy of a bank’s letter of credit, and a $20,000 check. The parties agree that
the plaintiff was properly qualified to bid on the property.
Thereafter, the defendant’s auctioneer (a man named Jack Lyon) began the
auction. The defendant’s auctioneer did not announce any new or modified terms for the
auction; he simply sought bids on the property. However, another individual named Kurt
Lerch joined the bidding with the plaintiff. Bidding began at $200,000, and after a brief
round of increasing bids between the plaintiff and Mr. Lerch, the plaintiff won the auction
with a high bid of $265,000.
The plaintiff subsequently filed this lawsuit against the defendant. The
plaintiff alleged that, immediately after the auction ended, he learned that Mr. Lerch had
not met the bidding requirements because he had not deposited 10% before bidding. The
plaintiff’s lawsuit sought damages based upon various legal theories, including breach of
contract, because the defendant had permitted an unqualified bidder (Mr. Lerch) to bid on
the property. The defendant responded to the lawsuit, and the parties conducted discovery.
The plaintiff and the defendant subsequently filed motions for summary
judgment. The plaintiff pointed out that the defendant admitted that Mr. Lerch had not
placed a 10% deposit before the auction, had not signed a bidder’s registration agreement,
and had not offered any bank letter guaranteeing he could purchase the property. Instead,
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the defendant claimed that Mr. Lerch was a qualified bidder because the defendant’s
auctioneer, Mr. Lyon, had personally qualified Mr. Lerch to bid before the auction “by
virtue of his prior relationship with the [d]efendant and Mr. Lyon.” 3
Moreover, the plaintiff took the deposition of Mr. Lyon, the defendant’s
auctioneer. Mr. Lyon testified that if the plaintiff were the only qualified bidder on the
property, then the winning price would have been only $200,000. Mr. Lyon testified as
follows:
Q. If Kurt Lerch were not qualified to bid on the property,
meaning [the plaintiff] Mr. Leach was the only bidder, what
would the selling price have been?
A. The price would have been $200,000.
On April 5, 2018, the circuit court entered an order granting summary
judgment to the plaintiff and denying the defendant’s motion for summary judgment.
Because of the confusing language in the defendant’s advertisements and catalog, the
circuit court found that the sale met the definition of an “auction with reserve” because of
the requirement for a minimum bid of $200,000. However, once that minimum bid was
placed, the circuit court found that the defendant had advertised the sale as an “absolute
The defendant also asserted that it had an “in-house” policy of allowing
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individuals to become “permanent qualified bidders” with a “permanent bid number,” and
these individuals would not have to meet advertised qualifications before bidding at
auctions. However, the defendant failed to produce any documentation showing Mr. Lerch
was such a perpetually qualified bidder. Furthermore, the record is undisputed that the
defendant neither advertised before, nor announced at, the auction its policy of waiving
posted terms and conditions for these so-called “permanent qualified bidders.”
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auction.” The circuit court then determined that when a party offers property for sale in an
“absolute auction,” a contract is formed between the bidder and the auctioneer with every
bid, until a higher bid is offered. In other words, the auctioneer’s advertising material was
an offer from the auctioneer to sell the property at the price bid by the highest bidder, and
the bidder accepted the offer and formed a binding contract with every bid.
Additionally, the circuit court determined that the terms of the auctioneer’s
offer are contained in the auction’s advertising materials, and that these terms are binding
on the auctioneer unless there is an effective modification by the auctioneer. Once the
auctioneer sets forth the terms of the auction in advertising, bidders may rely on those
advertised terms in forming bids, and both the bidder and the auctioneer (and the seller for
whom the auctioneer works) are bound by those advertised terms.
Applying these rules to this case, the circuit court found that the defendant’s
advertisements and catalog were “clear, unambiguous and undisputed,” and required
bidders to make a 10% deposit of the minimum bid as well as provide a letter of credit
guaranteeing that the bidder could complete the purchase. The circuit court found it was
undisputed that the plaintiff met these pre-auction qualifications and that the other bidder,
Mr. Lerch, did not. Accordingly, the circuit court found that a contract was formed
between the plaintiff and defendant when the plaintiff properly bid $200,000 or more on
the property, and the contract incorporated requirements that every bidder qualify by
posting a deposit, presenting a bank letter of guarantee, and signing the bidder’s registration
agreement. The circuit court then found that the defendant breached the contract when it
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permitted someone who was not a qualified bidder to also bid on the property. As the sole
qualified bidder, the circuit court concluded that the plaintiff should have been permitted
to buy the property at the minimum required bid, that is, for $200,000.
Because the plaintiff (as the winning bidder against Mr. Lerch) paid
$265,000 after the conclusion of the auction, the circuit court ordered the defendant to
repay the plaintiff $65,000 for the excess purchase price and $3,867.50 in excess auction
commission fees, plus pre- and post-judgment interest.
The defendant now appeals the circuit court’s April 5, 2018, summary
judgment order.
II. Standard of Review
We review a circuit court’s entry of summary judgment de novo. Syllabus
Point 1, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994). “The question to be
decided on a motion for summary judgment is whether there is a genuine issue of material
fact and not how that issue should be determined.” Syllabus Point 5, Aetna Casualty &
Sur. Co. v. Federal Ins. Co., 148 W. Va. 160, 133 S.E.2d 770 (1963).
We have repeatedly held that under Rule 56(c) of the West Virginia Rules of
Civil Procedure, “[a] motion for summary judgment should be granted only when it is clear
that there is no genuine issue of fact to be tried and inquiry concerning the facts is not
desirable to clarify the application of the law.” Syllabus Point 3, id. “Summary judgment
is appropriate where the record taken as a whole could not lead a rational trier of fact to
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find for the nonmoving party[.]” Syllabus Point 4, in part, Painter, 192 W. Va. at 190, 451
S.E.2d at 756. Moreover, we have explained that:
Roughly stated, a “genuine issue” for purposes of West
Virginia Rule of Civil Procedure 56(c) is simply one half of a
trialworthy issue, and a genuine issue does not arise unless
there is sufficient evidence favoring the non-moving party for
a reasonable jury to return a verdict for that party. The
opposing half of a trialworthy issue is present where the non-
moving party can point to one or more disputed “material”
facts. A material fact is one that has the capacity to sway the
outcome of the litigation under the applicable law.
Syllabus Point 5, Jividen v. Law, 194 W. Va. 705, 461 S.E.2d 451 (1995). Finally, we are
cognizant that a plaintiff bears the burden of proof at a trial on the merits, and therefore “a
plaintiff only is entitled to summary judgment where his evidence is so strong that he would
be entitled to a directed verdict at trial.” Williams v. Precision Coil, Inc., 194 W. Va. 52,
62 n.17, 459 S.E.2d 329, 339 n.17 (1995).
We now examine the record and the parties’ arguments to assess whether the
defendant presented any genuine issue of material fact, or whether inquiry concerning the
facts is desirable to clarify the application of the law.
III. Discussion
A contract is a “promise or set of promises” that is enforceable or otherwise
recognizable at law. Contract, BLACK’S LAW DICTIONARY (11th ed. 2019). Among the
various requirements to form a contract, the two key requirements we examine in this case
are “an offer and an acceptance[.]” Dan Ryan Builders, Inc. v. Nelson, 230 W. Va. 281,
287, 737 S.E.2d 550, 556 (2012). In other words, there must be one party who makes an
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offer and another who accepts the offer, thereby reaching a “mutual assent” and a meeting
of the minds.
In order for this mutuality to exist, it is necessary that there be
a proposal or offer on the part of one party and an acceptance
on the part of the other. Both the offer and acceptance may be
by word, act or conduct that evince the intention of the parties
to contract. That their minds have met may be shown by direct
evidence of an actual agreement or by indirect evidence
through facts from which an agreement may be implied.
Bailey v. Sewell Coal Co., 190 W. Va. 138, 140-41, 437 S.E.2d 448, 450-51 (1993).
In this case, we are asked to consider the unique context of auctions, to
examine the contract requirements of “offer” and “acceptance,” and to weigh how a seller
and buyer in an auction reach a mutual assent. In the context of auctions, our research and
that of the parties reveals no controlling law on these contract requirements in West
Virginia, and a surprising paucity of case law in other jurisdictions. Instead, much of the
law in this area derives from legal encyclopedias and treatises such as WILLISTON ON
CONTRACTS, the RESTATEMENT (SECOND) OF CONTRACTS, and AMERICAN
JURISPRUDENCE 2D. As one court said,
The law related to sale of property at an auction is a legal
anomaly. Various treatises describe the controlling legal
principles at length and are, for the most part, in harmony.
Little of this law, however, has made its way into the case law.
Many state and federal courts, therefore, have relied on the
treatises’ persuasive authority for auction questions.
Pyles v. Goller, 674 A.2d 35, 39 (Md.App. 1996).
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Here, the defendant directly challenges the circuit court’s legal finding
concerning when an offer was made to buy the Vienna property, and when or if that offer
was accepted at the auction. The defendant asserts that the circuit court erred in holding
that the defendant’s pre-auction advertising was an offer to prospective bidders to form a
contract, and that an appropriate bid at the auction by the plaintiff was an acceptance of the
offer. The defendant argues that its advertising did not create an offer to prospective
bidders and was nothing more than a generic advertisement inviting bids at an auction. To
consider the defendant’s arguments, we must first identify the rules governing contract
formation in the context of an auction.
West Virginia Code § 19-2C-1(h) (2019) defines an “auction” as “any public
sale of real or personal property in any manner . . . when offers or bids are made by
prospective purchasers and the property sold to the highest bidder.” “The main purpose of
auction sales is to obtain the best financial return for the seller by the free and fair
competition among bidders.” 7A C.J.S. Auctions and Auctioneers § 1. See also, Peck v.
List, 23 W. Va. 338, 377 (1883) (“What is the nature of such a sale by auction? It is that
the goods shall go to the highest real bidder.”).
There are generally two different types of auctions: those “with reserve,” and
those “without reserve” (also known as an “absolute auction”). The distinction between
auctions with or without reserve is important because “[i]n an auction setting, the point at
which mutual assent is achieved [and a contract formed] depends on the type of auction
being held.” Pyles, 674 A.2d at 39-40. See also Marten v. Staab, 543 N.W.2d 436, 443
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(Neb. 1996) (“In order to determine whether a contract was formed at the auction, it is
necessary to identify the type of auction that occurred.”).
The distinguishing feature between an auction with reserve or without
reserve is, simply, whether the property being sold can be withdrawn before the close of
the auction. In an auction with reserve, the auctioneer or seller “may withdraw the goods
at any time until he announces completion of the sale;” in an absolute auction or an auction
without reserve, “after the auctioneer calls for bids on an article or lot, that article or lot
cannot be withdrawn unless no bid is made within a reasonable time.” Pitchfork Ranch
Co. v. Bar TL, 615 P.2d 541, 551 n.12 (Wyo. 1980) (quoting 7 AMJUR.2D Auctions and
Auctioneers § 17).
An auction with reserve is one “in which the property will not be sold unless
the highest bid exceeds a minimum price.” Auction, BLACK’S LAW DICTIONARY. “The
presumption in contract law is that auctions are held ‘with reserve’ unless otherwise
specified.” Pyles, 674 A.2d at 40. See also W.Va. Code § 46-2-328(3) (1963) (Under the
Uniform Commercial Code, in a sale of goods by auction, “[s]uch a sale is with reserve
unless the goods are in explicit terms put up without reserve.”). As noted before, in an
auction with reserve, the auctioneer or seller may withdraw the property at any time until
the auctioneer announces the completion of the sale.
In an auction with reserve, the auctioneer, as agent of the seller,
invites bids (offers) with the understanding that no bargain [or
contract] exists until the seller has made a further manifestation
of assent; the auctioneer may reject all bids and withdraw the
goods from sale until he announces completion of the sale.
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Rosin v. First Bank of Oak Park, 466 N.E.2d 1245, 1249 (1984). See also W.Va. Code §
46-2-328(3) (“In an auction with reserve the auctioneer may withdraw the goods at any
time until he announces the completion of the sale.”).
Because the seller in a with-reserve auction reserves the right not to sell the
property and may withdraw the property before acceptance of the highest bid, “an
auctioneer’s bringing a piece of property up for bid is an invitation to make a contract, and
is not an offer to contract.” Pyles, 674 A.2d at 40. See also Marten v. Staab, 537 N.W.2d
518, 522-23 (Neb. App. 1995) (“In an auction with reserve, the bidder is deemed to be the
party making the offer while the auctioneer, as agent for the seller, is the offeree.”). It is
therefore “the general rule that in auction sales, a bid is regarded as an offer to contract
which is accepted ‘by the fall of the hammer.’” Clemens v. United States, 295 F. Supp.
1339, 1340 (D.Or. 1968). “[A]sking for bids is asking for offers, which the seller or the
seller’s agent [the auctioneer] remains free to reject prior to acceptance.” 7 AM.JUR.2D
Auctions and Auctioneers § 13. “[A] potential purchaser’s bid is the equivalent of an offer
to buy merchandise, and an offer is accepted by the auctioneer upon the fall of the
hammer.” Id. See also Pitchfork Ranch, 615 P.2d at 547 (“[T]he sale contract is
consummated by the offer of the bidder to buy and the acceptance of the bid by the seller.”).
“The ramification of a with reserve auction is that the principal may choose to withdraw
the property at any time, before the hammer falls, and if the bidding is too low—the
auctioneer need do nothing and there is no contract between the seller and the bidder.”
Marten, 537 N.W.2d at 523.
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An auction without reserve is one “in which the property will be sold to the
highest bidder [and] no minimum price will limit bidding.” Auction, BLACK’S LAW
DICTIONARY. Furthermore, in an auction without reserve, “the owner may not withdraw
property after the first bid is received, the owner may not reject any bids, and the owner
may not nullify the bidding by outbidding all other bidders.” Id.
In an auction without reserve, the contract-forming roles of the parties are
inverted from those in an auction with reserve: the seller (and the seller’s agent, the
auctioneer) “becomes an offeror, and each successively higher bid creates a contingent
acceptance, with the highest bid creating an enforceable contract.” Id. As one court stated,
The words “without reserve” as used in auctions are
words of art, assuring prospective bidders that the property will
actually go to the bidder offering the highest price. The seller
may not nullify this purpose by bidding himself or through an
agent, nor by withdrawing the property from sale if he is not
pleased with the bids. Thus, the seller may not refuse to accept
a bid where the auction is without reserve; the bid itself
establishes a right in the bidder to have the property unless
someone else by raising his bid succeeds to his right.
Zuhak v. Rose, 58 N.W.2d 693, 696 (Wis. 1953). Stated differently,
When an auction is “without reserve” or “absolute,” a seller
makes an offer to sell when the seller advertises the sale and it
is up to the bidder to accept. The seller is the offeror and the
bidder is the offeree. A contract is formed with each bid, and
the seller may not withdraw the property once any legitimate
bid has been submitted, but is absolutely committed to the sale
once the bid has been entered.
Washburn v. Thomas, 37 P.3d 465, 467 (Colo. App. 2001). See also, Pitchfork Ranch, 615
P.2d at 548-49 (“[I]n the no-reserves auction, the contract is consummated with each bid,
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subject only to a higher bid being received. This is so because the seller makes his offer to
sell when he advertises the sale will be a no-reserves sale to the highest bidder. Once the
first bid has been received, the only acceptance which forms a binding agreement is the
one offered by the highest bidder. . . In the no-reserves situation, the seller is absolutely
committed to the sale once a bid has been entered, no matter what the level of bidding or
the seller’s notion of the property’s true value.”); 7 AM. JUR. 2D Auctions and Auctioneers
§ 36 (“The words ‘without reserve’ as used in auctions are words of art, as showing
prospective bidders that the property will actually go to the bidder offering the highest
price, and the seller may not nullify this purpose by bidding himself or through an agent,
or by withdrawing the property from sale if he is not pleased with the bids.”).
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The drafters of the RESTATEMENT (SECOND) OF CONTRACTS succinctly
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summarized the above-stated contract-formation rules for auctions:
At an auction, unless a contrary intention is manifested,
(a) the auctioneer invites offers from successive bidders
which he may accept or reject;
(b) when goods are put up without reserve, the
auctioneer makes an offer to sell at any price bid by the
highest bidder, and after the auctioneer calls for bids the
goods cannot be withdrawn unless no bid is made within
a reasonable time;
RESTATEMENT (SECOND) OF CONTRACTS § 28(1) (1981). The comments note that these
rules “reflect the usual understanding at an auction sale,” including the presumption that
auctions are conducted with a reserve unless a contrary intention is announced or otherwise
manifested. Id., cmt. a.
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In the case at bar, the defendant advertised the May 2016 auction as an
“absolute sale.” The term “absolute auction” is synonymous with an “auction without
reserve.” See, e.g., Marten, 543 N.W.2d at 443. In 2019, the Legislature amended its
statutes regulating auctioneers and adopted the following definition for an absolute auction:
“Absolute auction” means the sale of real or personal
property at auction whereby every item offered from the block
is sold to the highest bidder without reserve and without the
requirements of a minimum bid or other conditions which limit
the sale other than to the highest bidder.
W.Va. Code § 19-2C-1(a) (2019). 5
To summarize, we find the following guidelines generally govern auction
sales, unless a different intention is manifested. We hold that when real or personal
property is sold in an auction with reserve, the auctioneer (as agent of the seller) invites
offers from successive bidders which the auctioneer may accept or reject until the
auctioneer announces the completion of the sale. A bid is the equivalent of an offer to buy
the property, and no contract is formed until the auctioneer manifests final acceptance of
5
While the Legislature’s definition in West Virginia Code § 19-2C-1(a)
provides us with guidance, we note that the statutory definition was not in effect when the
defendant conducted its May 2016 auction. Moreover, neither party has argued for the
retroactive application of the statute.
Furthermore, in addition to defining an “absolute auction,” in 2019 the
Legislature also adopted a provision stating, “It is unlawful to conduct or advertise that an
auction is absolute if minimum opening bids are required or other conditions are placed on
the sale that limit the sale other than to the highest bidder.” W. Va. Code § 19-2C-10
(2019). In the instant case, the defendant advertised the May 2016 auction as “absolute”
but simultaneously required a minimum opening bid of $200,000. The defendant’s
advertisement would now appear to be prohibited by law.
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the bid. In an auction with reserve, the property will not be sold unless the highest bid is
equal to or exceeds a minimum price. In addition, we hold that when real or personal
property is sold at an auction, the sale is presumed to be with reserve unless the seller
announces that the property is to be sold without reserve.
We further hold that when real or personal property is sold at an auction
without reserve (also called an “absolute auction”), the auctioneer (as agent of the seller)
makes an offer to sell at any price bid by the highest bidder, and the offer is accepted and
a contract is formed with each higher bid placed by a buyer. Once the auctioneer calls for
bids, the property cannot be withdrawn from the auction. In an auction without reserve,
the property will be sold to the highest bidder and no minimum price or other condition
will limit bidding.
In the instant case, the defendant’s pre-auction advertising and catalog
obscured whether its auction was to be conducted “with reserve” or “without reserve.” On
the one hand, the pre-auction documents required a minimum opening bid of $200,000,
language which indicates an intent to conduct an auction with reserve. On the other hand,
the pre-auction documents announced, in large, bold lettering, that the defendant was
conducting an “Absolute Sale,” language which indicates that the defendant intended to
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hold an auction without reserve, and to sell the property to the highest bidder without the
requirement of a minimum bid. 6
The circuit court examined the ambiguous language of the defendant’s pre-
auction advertising and catalog, and concluded that, “even if an auction begins as one that
is ‘with reserve,’ that is, has a minimum bid, once the minimum bid is reached, if it is then
advertised as an ‘absolute’ auction, it then becomes an absolute auction.” The circuit court
reasoned that “when an auction is advertised as an absolute auction once a condition
precedent of a minimum bid has been satisfied, it becomes an absolute auction once the
minimum bid is reached.” In conclusion, the circuit court found that the defendant had
conducted an absolute auction such that, once anyone met the condition precedent and
offered the minimum bid of $200,000, the auctioneer was required to sell the property to
the highest bidder. The defendant challenges this finding by the circuit court and insists
that the auction was conducted solely as an auction “with reserve” and that the “absolute
sale” language in its advertisements and catalog has no meaning.
After reviewing the defendant’s advertisements and catalog, we find no error
in the circuit court’s conclusion. In Dry Creek Cattle Company v. Harriet Brothers
Partnership, 908 P.2d 399 (Wyo. 1995), the Supreme Court of Wyoming addressed a
As we noted supra in footnote 5, as of June 7, 2019, West Virginia’s auction
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law now provides that “[i]t is unlawful to conduct or advertise that an auction is absolute
if minimum opening bids are required or other conditions are placed on the sale that limit
the sale other than to the highest bidder.” W.Va. Code § 19-2C-10.
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situation like that in the instant case. An auction house had advertised the sale of a ranch
as a “Minimum Bid – Absolute Auction.” The Dry Creek court examined all of the
language in the advertisement, and found each word had to be given meaning and could
not be taken out of context. See, e.g., Syllabus Point 6, Columbia Gas Transmission Corp.
v. E. I. du Pont de Nemours & Co., 159 W. Va. 1, 217 S.E.2d 919 (1975) (“Each word in
a contract is presumed to have a unique meaning and, thus, no word or clause is to be
treated as a redundancy, if any meaning reasonable and consistent with other parts can be
given to it.”). Like the circuit court in this case, the Dry Creek court concluded the
ambiguous advertisement was “grammatically apt to convey the proposition that a
minimum bid must be received for all of the parcels before the auction would move to an
absolute sale. The legal effect is that this auction was one with reserves until that condition
was satisfied[.]” Dry Creek, 908 P.2d at 403.
The language used by the defendant in its advertising and catalog clearly
indicates a requirement of a minimum bid of $200,000, and just as clearly indicates an
intent that the defendant was conducting an absolute auction. Reading the advertisement
as a whole, we conclude that the defendant announced an intention to hold an absolute
auction with one condition precedent: that no bid would be accepted below $200,000.
However, once that condition was satisfied, the legal effect was that the auction was
conducted without a reserve and was absolute. In other words, in the advertisements and
catalog, the defendant auctioneer (as agent for the seller) made an offer to sell the property
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for any bid of $200,000 or more to the highest bidder, and a contract was formed with each
bid placed by a buyer.
The defendant asserts, however, that the circuit court erred in finding that the
advertisements and catalog had any contractual effect on the sale of the property.
Furthermore, the defendant argues that because an auction is an open sale, the general rule
is that anyone (like Mr. Lerch) is qualified to be a bidder. As we understand the defendant’s
position, once an offer is made and accepted at an auction and a contract is formed, the
question raised is this: does that contract incorporate the terms and conditions of the auction
advertisements? In the context of this case, does the contract incorporate the auctioneer’s
advertised requirement that potential bidders meet certain conditions before being qualified
to bid? And do those terms and conditions bind a seller and auctioneer?
The law is clear that “[i]t is the right of the owner of property sold at auction
to prescribe, within reasonable limits, the manner, conditions, and terms of sale.” Coleman
v. Duncan, 540 S.W.2d 935, 938 (Mo. App. 1976). See also, Love v. Basque Cartel, 873
F. Supp. 563, 570 (D. Wyo. 1995) (“The owner of the property offered for sale has the
right to prescribe the manner, conditions and terms of the sale.”). These terms and
conditions are announced to potential bidders in two ways: through advertisements,
publications, and catalogs distributed before an auction, or oral announcements by the
auctioneer at the start of the auction. See RESTATEMENT (SECOND) OF CONTRACTS § 28,
cmt. e (“The terms on which goods are to be sold at auction are often made known in
advertisements or catalogues or posted at the place where the auction is to be held.”). See,
18
e.g., In re C. Schmidt Co., 158 B.R. 717, 719 (Bankr. S.D. Ohio 1993) (“As is invariably
the case in such sales, the public was informed about the terms of the sale by means of the
bid package referred to above.”); Cont’l Can Co. v. Commercial Waterway Dist. No. 1 of
King Cty., 347 P.2d 887, 888-89 (Wash. 1959) (“The conditions of sale may be
incorporated in an advertisement of the auction[.]”); Zuhak v. Rose, 58 N.W.2d 693, 696
(Wis. 1953) (Seller “was responsible for informing plaintiff[-bidder] by the Tribune
advertisement, by circulars distributed at the auction and by the auctioneer’s oral
announcement, that there was to be a complete liquidation of all the advertised property
without reserve, and that the realty would be sold as a whole or piecemeal, whichever
brought the most money.”).
The law is also clear that a bidder is generally bound by the published or
announced terms and conditions of an auction, even if the bidder did not see or hear those
terms and conditions. However, “[i]mplicit in this statement is its reciprocal—that if the
7
7
See, e.g., Hessel v. Christie’s Inc., 399 F. Supp. 2d 506, 514 (S.D.N.Y.
2005) (“Courts in this District have held that by placing a bid in an auction, the bidder
‘consent[s] to be bound by the terms in the catalog governing the auction.’”); In re Wilson
Freight Co., 30 B.R. 971, 975 (Bankr. S.D.N.Y. 1983) (“Moreover, the terms and
conditions of the sale announced by Mr. Parks, the auctioneer, and Mr. Solarsh were
binding on Wes-Flo regardless of whether its bidder, Art Perry, knew or heard them.”);
Pitchfork Ranch, 615 P.2d at 553 (“The buyer may rely upon such announced terms and
conditions of the sale, and he is likewise bound thereby, whether present at the time of the
announcement or has knowledge thereof.”); Matter of Premier Container Corp., 408
N.Y.S.2d 725, 730 (Sup. Ct. 1978) (“The conditions of a public sale, announced by the
auctioneer at the time and place of the sale, are binding on the purchaser, whether or not
he knew or heard them.”); Coleman v. Duncan, 540 S.W.2d 935, 938 (Mo. App. 1976)
(“Usually the auctioneer . . . announces these terms and conditions which, when so
announced, are generally deemed . . . to bind the purchaser even though he did not hear or
Continued . . .
19
buyer is entitled to rely on the terms of the auction, then the seller is also bound by the
terms which he has set.” Love v. Basque Cartel, 873 F. Supp. at 570. The general rule is
that when a seller (or the seller’s agent, the auctioneer) establishes terms and conditions
for an auction in an advertisement or publication prior to an auction, those terms and
conditions are thereafter binding upon both the seller and any bidder; any bid placed at the
auction incorporates those terms and conditions unless there has been an effective
modification by the auctioneer. As the drafters of the RESTATEMENT (SECOND) OF
CONTRACTS stated:
Unless a contrary intention is manifested, bids at an
auction embody terms made known by advertisement, posting
or other publication of which bidders are or should be aware,
as modified by any announcement made by the auctioneer
when the goods are put up.
RESTATEMENT (SECOND) OF CONTRACTS § 28(2). Accord 7 AM. JUR. 2D Auctions and
Auctioneers § 14. See also, Ley Indus., Inc. v. Charleston Auctioneers, 603 N.E.2d 1037,
1040 (Ohio App. 1991) (“The terms of the contract are understood to be those presented in
the solicitations for bids published in the relevant advertisement or legal notice prior to the
auction, or as modified by the auctioneer before bids are submitted. . . . Accordingly, the
legal notice or advertisement, containing the description of the property and the other
relevant terms of sale, along with the buyer’s bid presented in written form, would
understand the announcement, or was not present at the time of the announcement and such
terms (or conditions) were not brought to his actual attention.”); Moore v. Berry, 288
S.W.2d 465, 468 (Tenn.App. 1955) (“It seems to be a settled rule in this state as well as
elsewhere that conditions prescribed by the seller or owner and announced at the time and
place of the auction are binding on the purchaser whether or not he knew or heard them.”).
20
constitute the parties’ contract.”); Holston v. Pennington, 304 S.E.2d 287, 290 (Va. 1983)
(“It is generally held that an advertisement of a forthcoming auction obligates the owner to
conduct a bona fide sale in accordance with the advertised terms[.]”); Schwartz v. Capital
Sav. & Loan Co., 381 N.E.2d 957, 959 (Ohio Ct. App. 1978) (“A person responding to an
advertisement that an auction sale will be held has a right to rely upon the representations
made therein and that the advertisement is made in good faith[.]”); Johnson v. Haynes, 532
S.W.2d 561, 565 (Tenn. Ct. App. 1975) (“[W]here the right to reject bids is not stated in
the printed posters, nor is it announced at the sale, that right cannot be asserted [by the
seller] after the bid is accepted by the fall of the hammer or other act of acceptance by the
auctioneer.”); Kivett v. Owyhee Cty., 74 P.2d 87, 91 (Idaho 1937) (“Printed conditions
under which a sale proceeds are binding on both buyer and seller[.]”); Whitfield v. May, 89
S.W.2d 764, 768 (Tenn. Ct. App. 1935) (“Printed conditions under which a sale proceeds
are binding on both the buyer and seller[.]”); Erie Coal & Coke Corp. v. United States, 266
U.S. 518, 520 (1925) (“The terms and conditions of the sale as set forth in the advertisement
were binding alike upon [the seller] the United States and the bidders.”); 7A C.J.S. Auctions
and Auctioneers § 21 (“The purchaser is entitled to rely on the terms prescribed and on the
announcement made by the auctioneer at the time and place of the sale as to the identity of
the property, the terms and the conditions of sale.”); 1 WILLISTON ON CONTRACTS § 4:12
21
(“Thus, ordinarily, terms and conditions published in the advertisements of the auction or
announced at the commencement of the sale typically are binding on the parties.”). 8
An auctioneer or seller may include in the published terms and conditions of
an auction a requirement that, before a potential buyer may place a bid, the buyer must
make a deposit. “An auctioneer conducting an auction sale may, in a proper case, require
a bidder to deposit or furnish a reasonable security as a condition of the acceptance and
reporting of his or her bid.” 7A C.J.S. Auctions and Auctioneers § 23 (2020). However,
it is an axiom that public policy requires bidding at auctions to be open, free, and
competitive, so that both bidders and the property owner receive the highest but fairest
8
We note that in some jurisdictions, the auctioneer may verbally announce
alterations to the terms and conditions published prior to the auction in advertisements or
a catalog. In other jurisdictions, the printed conditions cannot be altered by oral statements
of the auctioneer at the time of sale; instead, the previously published conditions may only
be explained. See generally, 7 Am. Jur. 2d Auctions and Auctioneers § 18 (In some
jurisdictions, “[t]he terms made known by the announcement, posting, or other publication
may be modified by any announcement made by the auctioneer when the goods are put up.
Others take the view that the printed terms may not be varied or contradicted by parol
evidence of the verbal statements made by the auctioneer at the time of the sale, although
it is otherwise where the oral declarations are not repugnant to, or inconsistent with, the
advertisements or notices, but are merely explanatory.”); 7A C.J.S. Auctions and
Auctioneers § 24 (“Jurisdictions vary as to whether printed conditions are binding on the
parties and the auctioneer’s right to verbally vary or explain such conditions at the sale.”).
While this question has not been resolved by this Court, we need not address
it in this case because the record is clear that the defendant’s auctioneer made no oral
statements attempting to change the pre-auction printed terms and conditions. The record
shows that the pre-auction advertisements and catalog required any prospective bidder to
place a deposit, produce a “Bank Letter of Guarantee,” and sign a “Bidders Registration
Agreement.” The defendant’s auctioneer made no announcement at the auction altering
these terms and conditions.
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price through competitive bidding. See, e.g., Syllabus Point 2, Henderson v. Henrie, 61
W. Va. 183, 56 S.E. 369 (1907) (“But all contracts for the purpose of suppressing and
chilling competitive bidding upon property offered for sale at public auction, in order to
obtain it at under value, or to obtain undue and unconscientious advantages, are fraudulent
and void, and will not be enforced[.]”); Syllabus Point 1, Peck v. List, 23 W. Va. at 338 (“If
the owners of goods or of an estate put up for sale at auction by his direction employ one
or more puffers to bid for him, it is a fraud on the real bidders, and the highest bidder cannot
be compelled to complete the contract.”); Syllabus Point 2, Hilleary & Johnson v.
Thompson, 11 W. Va. 113 (1877) (“An auctioneer or crier making a sale cannot properly
act for himself, or any other person in bidding for the property.”).
Hence, “[b]ecause of the general principle that all the bidders must stand
upon an equal footing,” an auctioneer cannot vary the announced terms of the sale as to
any one bidder to the detriment of the other bidders. 7 Am. Jur. 2d Auctions and
Auctioneers § 17. “It is of the essence of an auction that there shall be full and free
opportunity for competition among bidders. So true is this that any agreement unfairly
restrictive of that opportunity is against public policy and void.” Manhattan Taxi Serv.
Corp. v. Checker Cab Mfg. Corp., 171 N.E. 705, 707 (N.Y. 1930). “[B]y placing a bid in
an auction, the bidder ‘consent[s] to be bound by the terms in the catalog governing the
auction,’” Hessel, 399 F. Supp. 2d at 514, and “any bid not in conformity with the terms
and conditions of sale as advertised and announced by the auctioneer is not entitled to
consideration.” 7 AM. JUR. 2D Auctions and Auctioneers § 32.
23
In summary, we find that the law guiding our decision is well established.
We hold that the seller of property sold at auction may prescribe, within reasonable limits,
the terms and conditions of the sale. A bidder at an auction is generally bound by the
published or announced terms and conditions of an auction, even if the bidder did not see
or hear those terms and conditions. When a seller (or the seller’s agent, the auctioneer)
establishes terms and conditions for an auction of property in an advertisement or
publication prior to an auction, those terms and conditions are thereafter binding upon both
the seller and any bidder. Any bid placed at the auction incorporates those terms and
conditions unless there is an effective modification. Finally, as a general principle, all the
bidders at an auction must stand upon an equal footing. Accordingly, an auctioneer cannot
vary the announced terms of the sale as to some bidders, or any one bidder, to the detriment
of the other bidders.
In the instant case, the record shows that the defendant (on behalf of the
owner of the property sold at auction) placed advertisements and published a catalog that
prescribed terms and conditions of the auction sale. Those advertisements and catalog
required any prospective bidder to present a $20,000 deposit; to provide a bank letter
guaranteeing the prospective bidder could complete the purchase; and to sign a “Bidders
Registration Agreement.” The plaintiff knew of these terms, was legally bound to comply
with the terms, and did comply with the terms. The record is also clear that Mr. Lerch did
not post a deposit, did not provide a letter of guarantee, and did not sign a bidder’s
registration agreement, and so did not comply with the advertised terms and conditions of
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the auction. When the defendant posted those terms in its advertisements and catalog, those
terms became binding upon the defendant. Any bid at the auction was required to
incorporate those terms, and the defendant could not fairly, and without announcement,
require those terms for the plaintiff while waiving those same terms for Mr. Lerch.
Fundamental principles of fairness required the defendant to treat the plaintiff and Mr.
Lerch equally, and to have disclaimed any bid by Mr. Lerch when it became clear to the
auctioneer that he had not met the pre-auction requirements to qualify to bid. Accordingly,
the circuit court correctly found it was improper for the defendant to vary the announced
terms of the sale for Mr. Lerch to the detriment of the plaintiff.
As the defendant’s auctioneer admitted in a deposition, had Mr. Lerch not
been permitted to bid, the property would have been sold to the plaintiff for $200,000. The
circuit court, therefore, correctly ordered that the defendant permit the plaintiff to purchase
the property for that price.
The record presented shows that no genuine issue of material fact existed to
be tried regarding the formation of a contract between the plaintiff and the defendant, and
the defendant’s failure to comply with the terms and conditions of that contract. No inquiry
concerning the facts would clarify the application of the law. Hence, we find no error in
the circuit court’s decision in favor of the plaintiff.
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IV. Conclusion
The circuit court’s April 5, 2018, order correctly granted summary judgment
to the plaintiff and denied summary judgment for the defendant.
Affirmed.
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