Drew v. John Deere Co. of Syracuse, Inc.

• Decision Date: 01 July 1963
• Citation: 19 A.D.2d 308,241 N.Y.S.2d 267
• Parties: , 2 UCC Rep.Serv. 519 John M. DREW, Appellant, v. JOHN DEERE COMPANY OF SYRACUSE, INC., and Robert Matson, Respondents.
• Court: New York Supreme Court — Appellate Division

Page 267

241 N.Y.S.2d 267

19 A.D.2d 308, 2 UCC Rep.Serv. 519

John M. DREW, Appellant, v. JOHN DEERE COMPANY OF SYRACUSE, INC., and Robert Matson, Respondents.

Supreme Court, Appellate Division, Fourth Department.

July 1, 1963.

Dean A. Drew, Buffalo, for appellant, DeSilver G. Drew, Buffalo, of counsel.

Costello, Cooney & Fearon, Syracuse, for respondents, Angela E. Struglia, Syracuse, of counsel.

Before BASTOW, J. P., and GOLDMAN, HALPERN, McCLUSKY and HENRY, JJ.

HALPERN, Justice.

This is an appeal from an order denying the plaintiff's motion to strike out the answer of the defendants as sham and frivolous and for summary judgment.

The theory of the complaint is that a contract by the corporate defendant to sell a certain tractor to the plaintiff had come into existence as the result of an auction sale conducted by the defendant and that the defendant breached the contract by refusing to deliver the tractor upon the tender of the purchase price.

The corporate defendant was the assignee of a conditional sales contract covering the tractor, which it had repossessed upon the vendee's default. More than 50% of the purchase price having been paid, the defendant was required to resell the repossessed tractor at public auction (Personal Property Law, § 79). The defendant advertised the auction sale, stating that the property would be sold to the highest bidder at the sale. The plaintiff bid $1500 at the sale but the auctioneer did not accept the bid; instead he announced that the defendant itself had bid $1600 and accordingly the property was struck down to the defendant.

The plaintiff claims that the defendant was disqualified to bid because it had not announced in advance that it intended to bid pursuant to section 102, subdivision 4, of the Personal Property Law. Hence, the plaintiff argues, his bid was the highest lawful bid and therefore a contract of sale came into existence between the plaintiff and the defendant for the sale of the tractor at the price bid.

The plaintiff's whole case rests upon the theory that the auction was one 'without reserve'. At such an auction, the owner of the property has no right to withdraw the property after bidding has commenced. It is also necessarily implicit in an auction 'without reserve', that the owner of the property may not himself bid in the property, as this would be equivalent to withdrawing it from sale (Restatement of Contracts, § 27). Various legal theories have been advanced for the holding that the announcement that the auction would be 'without reserve' imposes a binding legal obligation upon the owner, but the best view seems to be that the owner, by making such an announcement, enters into a collateral contract with all persons bidding at the auction that he will not withdraw the property from sale, regardless of how low the highest bid might be (Gower, 'Auction Sales of Goods Without Reserve', 68 Law Quarterly Review 457; Warlow v. Harrison (1859) 1 E. and E. 295, 309). Therefore, the highest bona fide bidder at an auction 'without reserve' may insist that the property be sold to him or that the owner answer to him in damages (Zuhak v. Rose, 264 Wis. 286, 58 N.W.2d 693; Forbes v. Hunter, 223 Ill.App. 400; Jones v. Hackensack Auto Wreckers, 124 N.J.L. 289, 11 A.2d 595; 7 Am.Jur.2d Auctions, § 21, p. 240; Annot., 37 A.L.R.2d 1049, 1056; 1 Corbin on Contracts, § 108, p. 341; 2 Williston on Sales, § 297, p. 205).

On the other hand, in an auction sale not expressly announced to be 'without reserve', the owner may withdraw the property at any time before it is actually 'knocked down' to a bidder by the auctioneer. There is no contract until the offer made by the bidder is accepted by the auctioneer's 'knocking down' the property to him (Personal Property Law, § 102, subd. 2). 'An auction 'with reserve' is the normal procedure' (Comment 2 to section 2-328, Uniform Commercial Code).

In our case, there was no express statement that the auction would be 'without reserve'. The statement that the sale would be made to the highest bidder is not the equivalent of an announcement that the auction would be 'without reserve' (cf. Personal Property Law, § 102(2); Uniform Commercial Code, § 2-328, subd. 3). 'An announcement that a person will sell his property at public auction to the highest bidder is a mere declaration of intention to hold an auction at which bids will be received' (7 C.J.S. Auctions and Auctioneers § 1 a, p. 1240; Anderson v. Wisconsin Cent. Ry. Co., 107 Minn. 296, 314, 120 N.W. 39, 46, 20 L.R.A.N.S., 1133; 7 Am.Jur.2d, Auctions and Auctioneers, § 20, p. 237).

Corbin writes that the auctioneer at an auction sale in asking for bids, does not make an operative offer. 'This is true even though the seller or his representative has issued advertisements or made other statements that the article will be sold to the highest bidder, or is offered for sale to the highest bidder. Such statements are merely preliminary negotiation, not intended and not reasonably understood to be intended to affect legal relations. When such is the case, the seller or his representative is as free to reject the bids, highest to lowest, as are the bidders to withdraw them. The seller may at any time withdraw the article from sale, if he has not already accepted a bid. He need give no reasons; indeed, he rejects all bids by merely failing to accept them--by doing nothing at all. It is not necessary for him to say that 'the privilege is reserved to reject any and all bids.' Such a statement is merely evidence that the goods are not being offered 'without reserve" (1 Corbin on Contracts, § 108, pp. 338-340).

Since, upon the present record, the auction sale appears to have been 'with reserve', no contract of sale came into existence, even if we assume that the plaintiff was the highest lawful bidder (Freeman v. Poole, 37 R.I. 489, 93 A. 786, L.R.A.1971A, 63). Concededly, the plaintiff's bid was never accepted. Therefore, the plaintiff's papers upon his motion for summary judgment fail to make out a cause of action for breach of contract.

In view of this conclusion, it is unnecessary to decide the legal questions discussed by the parties as to the meaning and effect of sections 79 and 102(4) of the Personal Property Law....