Opinion ID: 891708
Heading Depth: 3
Heading Rank: 2

Heading: Private Negotiations and Bargaining

Text: {69} Before today our Court had not discussed the elements required for a valid public auction. In State ex rel. Otto v. Field , however, we wrote that the Enabling Act requires the same basis for all bids and bidders and that a negotiated contract, established after an auction, would be objectionable because it would defeat that requirement. 31 N.M. 120, 179, 241 P. 1027, 1050 (1925). Other jurisdictions have found that negotiations and bargaining prior to an auction impede competition and are inconsistent with the meaning of a true auction. As we shall see, the presence of extended negotiations with one bidder long before notice to the public of an auction presents a particular problem for the Land Commissioner in this case. {70} The U.S. Supreme Court long ago recognized the contradiction between private negotiation and public auction. See Porter v. Graves, 104 U.S. 171, 26 L.Ed. 691 (1881). In Porter, a seller negotiated for the sale of property left intestate, for which state law required sale of the intestate property at a public auction. Id. at 172-73. In order to comply with that law, the property was advertised and then announced at the sale by the auctioneer as sold to perfect a contract for sale to the buyer's company. Id. at 173. The Court found that, if the sale were challenged by parties interested in having the property bring its full value, the sale would surely have been set aside because it was not a valid auction. Id. at 174. Continuing on, in language particularly appropriate to the four challenged exchanges in this case, the Court stated: To make a private bargain beforehand between the party who wishes to buy and the person authorized to sell, as to the price and other incidents of the contract, and then invoke the forms of a public sale with competition to give effect to the private bargain is a course of procedure well calculated to defeat the purpose for which the public sale is required. Id. at 174. {71} Similarly, state courts have found negotiations and bargaining between bidders prior to an auction to be antithetical to a valid auction. In Hammond, the Idaho Supreme Court found that a conveyance of state trust land was not sold by auction as required by the state's constitution, when negotiations occurred between the bidding parties. 177 P. at 400-01. Before bidding started, auction participants drew lots among themselves for the parcels of land available and then took turns bidding, one party per parcel, as determined by the lots drawn. Id. Although the court found that not all agreements among prospective bidders would defeat an auction, if the purpose in so agreeing is to stifle competition, and if it causes the property to be awarded to a bidder, or bidders, for less than would have otherwise been offered, the vendor may avoid the sale. Id. at 401. Because the court found the sale was void, it rejected the writ of mandamus requesting enforcement of the sale. Id. {72} We recognize that bargaining and negotiation between buyers and sellers or between buyers prior to a sale negates the essence of what it means to have a public auction free and open to competition. Rather than seeking the highest financial gain through objective means, negotiation and bargaining design a satisfactory exchange for two parties to the exclusion of the public. See Black's Law Dictionary, supra, at 169 (defining a bargain as [a]n agreement between parties for the exchange of promises or performances), 1136 (defining a negotiation as [a] consensual bargaining process in which the parties attempt to reach agreement on a disputed or potentially disputed matter). Negotiation usu[ally] involves complete autonomy for the parties involved, without the intervention of third parties. Black's Law Dictionary, supra, at 1136.