Opinion ID: 1734218
Heading Depth: 1
Heading Rank: 7

Heading: effect of auction

Text: The personal representatives next urge that the district court erred in holding that a contract resulted from the auction of the lands. Before a court may compel specific performance, there must be a showing that a valid, legally enforceable contract exists. The burden of proving a contract is on the party who seeks to compel specific performance.... To establish a contract capable of specific enforcement it must be shown that there was a definite offer and an unconditional acceptance.... A party attempting to enforce a contract, therefore, has the burden of proving there was a definite offer and an unconditional acceptance. Furthermore, for a binding contract to result from an offer and acceptance, it is essential that the minds of the parties meet at every point. Nothing can be left open for further arrangement. Satellite Dev. Co. v. Bernt, 229 Neb. 778, 780-81, 429 N.W.2d 334, 337 (1988). Whether a contract was formed at the auction is a question of law, upon which this court must reach a conclusion independent of the trial court. See, Poppleton v. Village Realty Co., 248 Neb. 353, 535 N.W.2d 400 (1995); Pick v. Nelson, 247 Neb. 487, 528 N.W.2d 309 (1995); Hlava v. Nelson, 247 Neb. 482, 528 N.W.2d 306 (1995). In order to determine whether a contract was formed at the auction, it is necessary to identify the type of auction that occurred. We agree that [t]here are generally two methods for a seller to offer property for sale at an auction: either `with reserve' or `without reserve.' Nicholson v. Clark, 802 S.W.2d 934, 937 (Ky.App.1990). See, Drew v. John Deere Co., 19 A.D.2d 308, 241 N.Y.S.2d 267 (1963); Holston v. Pennington, 225 Va. 551, 304 S.E.2d 287 (1983); Pitchfork Ranch Co. v. Bar TL, 615 P.2d 541 (Wyo.1980); 1 Samuel Williston, A Treatise on the Law of Contracts § 4:9 (Richard A. Lord 4th ed. 1990); 1 Arthur L. Corbin, Corbin on Contracts § 4.14 (Joseph M. Perillo rev. ed. 1993). We also accept that [i]n an auction with reserve, the auctioneer, as agent of the seller, invites bids (offers) with the understanding that no bargain 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. Rosin v. First Bank of Oak Park, 126 Ill. App.3d 230, 235, 81 Ill.Dec. 443, 447, 466 N.E.2d 1245, 1249 (1984). Moreover, we adopt the rule that in such auctions, the bidder is deemed to be the offeror, while the auctioneer is the offeree. Pitchfork Ranch Co., supra . And we agree as well that all auctions are presumed to be with reserve unless they are expressly stated to be without reserve. Cuba v. Hudson & Marshall, 213 Ga.App. 639, 445 S.E.2d 386, 387 (1994). See, Coleman v. Duncan, 540 S.W.2d 935 (Mo.App.1976); Drew, supra ; Holston, supra ; Pitchfork Ranch Co., supra . In an auction without reserve, also known as an absolute auction, Holston, supra, the rights and obligations of the parties are different. We further accept that [i]n the no reserves type of sale ... the legal relationship as between the seller and bidder is reversed. In the no-reserves sale, the seller becomes the offeror and the bidder the offeree by reason of a collateral contract theory.... [I]n the no-reserves auction, the contract is consummated with each bid, 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 this type of sale, the seller may not withdraw his property once any legitimate bid has been submitted, as he may do at any time before the hammer falls in the with-reserves auction. 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.... . . . . ... 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. (Emphasis in original.) Pitchfork Ranch Co., 615 P.2d at 548-49. See, Wilcher v. McGuire, 537 S.W.2d 844 (Mo.App.1976); Drew, supra ; Holston, supra ; Harvey Hoshour, Bids as Acceptances in Auctions Without Reserve, 15 Minn. L.Rev. 375 (1931); 1 Williston, supra; 1 Corbin, supra; Restatement (Second) of Contracts § 28(1)(b) (1981). Here, there were no express statements in the advertisements for the auction or at the auction itself which stated that the auction would be without reserve, indicating that the auction was with reserve. See, Drew, supra ; Pitchfork Ranch Co., supra . In addition, Huston stated that there would be a starting bid for each parcel of land. This also indicates that the auction was with reserve. See Nicholson, supra . Moreover, the advertisements and the announcement made at the start of the auction stated that the bids were subject to confirmation by the probate court. This, too, indicates that the auction was with reserve. See, Cuba, 213 Ga.App. at 640, 445 S.E.2d at 388 ([w]here the seller explicitly reserves the right to reject or approve, the auctioneer is without authority to accept for the seller); Rosin, supra ; Wilcher, 537 S.W.2d at 847 ([t]he provision in the sale bill that the land would sell subject to confirmation by the owner was a recognition of the fact the owner had only authorized a sale `with reserve'). Finally, when asked at the auction whether it was an absolute auction, Huston responded that it was not. While it is true, as the nephew points out, that at the beginning of the auction Huston stated that the auction was one with no protected bid, Huston testified at trial that his statement meant that the personal representatives were not going to personally bid on the sale. At a hearing prior to the trial, Huston testified that his statement meant that `we didn't have anybody that was going to protect the estate at all except the court.' Allan Woodward, an auctioneer of real estate, testified as an expert that the language there will be no protected bid means that the property will absolutely sell to the highest bidder. Leaving aside the question as to whether Woodward was improperly permitted to testify as to a question of law, see Sports Courts of Omaha v. Brower, 248 Neb. 272, 534 N.W.2d 317 (1995), the fact is that under the evidence there are no less than three different possibilities as to what no protected bid may have meant. Under that circumstance, it cannot be said that there was an express statement that the auction was without reserve. That fact, coupled with the other evidence on the issue, leads us on our de novo review to conclude that the auction was one with reserve. As the auction was one with reserve, the nephew as the bidder is the offeror. The question therefore is whether his bids, or offers, were accepted, resulting in a contract for the sale of the lands. In the usual case, the auctioneer is acting as the seller's agent and may accept a bid on behalf of the seller, thus forming a contract. Coleman v. Duncan, 540 S.W.2d 935 (Mo.App. 1976). However, there is a distinction between auctions which are merely conducted with reserve and those in which the seller explicitly reserves the right to approve, confirm or reject the high bid. Cuba v. Hudson & Marshall, 213 Ga.App. 639, 640, 445 S.E.2d 386, 388 (1994). Where ... the seller has reserved the right to refuse to accept any bid made, a binding sale is not consummated until the seller accepts the bid. When the seller reserves the right to reject any and all bids received, he may exercise this right even after the auctioneer has accepted a bid. Rosin v. First Bank of Oak Park, 126 Ill. App.3d 230, 235, 81 Ill.Dec. 443, 447, 466 N.E.2d 1245, 1249 (1984). See, Cuba, supra ; Coleman, 540 S.W.2d at 938 (`where a right is reserved in the seller to reject any and all bids received, the right may be exercised by the owner even after the auctioneer has accepted a bid, and this applies to the auction of public as well as private property' ); City of New York v. Union News Co., 222 N.Y. 263, 118 N.E. 635 (1918); Eugene Stud & Veneer, Inc. v. State Bd. of Forestry, 3 Or.App. 20, 469 P.2d 635 (1970); Moore v. Berry, 40 Tenn.App. 1, 288 S.W.2d 465 (1955); Continental Can v. Commercial Etc., 56 Wash.2d 456, 347 P.2d 887 (1959). As it was here made known both through advertisements and the announcement at the auction that any bids on the lands would have to be confirmed by the probate court, the situation is analogous to reserving a right in the seller to confirm, accept, or reject the bids. In both the instances of an auction with reserve and one in which the seller has reserved the right to refuse any bids, the acceptance of bids by the auctioneer is not the final act, but, rather, the sale is conditioned on confirmation by another party, in this case the court. Even if Huston accepted the bid, and this is by no means certain, his acceptance would not be enough to form a contract for the sale of the lands. Instead, a contract would only be formed by the occurrence of the stated condition, that is, confirmation by the probate court. See Pluhacek v. Nebraska Lutheran Outdoor Ministries, 227 Neb. 778, 420 N.W.2d 286 (1988) (agreement to sell land subject to approval of seller's governing board did not create enforceable contract). As the probate court rejected the nephew's bids, the condition did not occur, and no contract was formed. The district court therefore erred in failing to dismiss the nephew's petition for specific performance.