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As we noted in our post titled: Can auctioneers reopen the bidding?, there is no doubt this question represents the most discussed, misunderstood, misinterpreted and confusing issue auctioneers face.
Simply put, when an auctioneer says, “Sold!” or uses some other customary closing, he or she denotes:
- The auctioneer cannot take any further bids.
- The seller cannot withdraw the property.
- The high bidder cannot retract his bid.
However, since the mid-1960’s, the UCC 2-328 has been state law all across the United States (49 of 50 states, and applied in Louisiana equally). That law states, in part:
- 2-328 (2) A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner.
Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding
or declare the goods sold under the bid on which the hammer was falling.
So, state law in the United States says that indeed auctioneers can reopen the bidding in one, very specific, instance. “Where a bid is made while the hammer is falling …”
Steve Proffitt, a well-known attorney and auctioneer, noted in an article concerning such some time ago, that there is a limit on discretion of when the bid may be reopened. Mr. Proffitt suggested that if an auctioneer spotted a bid just as he is selling the property to another bidder, he has the option to reopen the bidding even if the word, “Sold!” was uttered.
However, on January 17, 1972, the Virginia Supreme Court ruled in Hoffman v. Horton et al 212 Va. 565 (186 S.E.2d 79), interpreting this particular law in a different manner.
The case involved a real estate auction, where an auctioneer had a high bid from Hubert N. Hoffman for $177,000, and no other bids appeared. The auctioneer even asked, “Are you all through bidding, gentlemen?”
After a pause, the auctioneer stated, “Going once for $177,000.00, going twice for $177,000.00, sold for $177,000.00.”
Right away, an attendee hurriedly notified the auctioneer that he, the auctioneer, had missed a bid of $178,000. The auctioneer had neither seen nor heard the bid, but stated that, “I’m going ahead with the sale,” meaning he would take the $178,000 bid, and continue with the auction. The $177,000 bidder protested, but kept bidding as the property ultimately sold to him for $194,000.
Mr. Hoffman filed suit, claiming he was due the $17,000 additional he was required to bid to procure the property, citing that the auctioneer had no right to reopen the bidding once he said, “Sold!” His claim presumably noted that the $178,000 bid was not made, “as the hammer was falling.”
The Virginia Supreme Court struggled only slightly with the UCC 2-328 being applied only to personal property, and stated that it was both necessary and fair to borrow the UCC 2-328 to give an auctioneer selling land the same discretion to reopen the bidding as one selling personal property.
Ultimately, the Virginia Supreme Court affirmed lower court rulings of the same, stating that the auctioneer indeed did have discretion to reopen the bidding when it was made apparent to him that a higher bid had been submitted “prior to or simultaneously with” the falling of his fist in acceptance of the plaintiff’s lower bid.
Here’s the significance of this ruling:
- The Court ruled an auctioneer may reopen the bidding if a bid was made:
- Prior to or simultaneously with the falling of the hammer.
- State law says an auctioneer may reopen the bid if a bid is made:
- While the hammer is falling.
State law suggests that if the $178,000 bid was not made “as the hammer was falling,” the bid cannot be reopened. Yet, the Virginia Supreme Court extended the time that the $178,000 bid could have been made to allow reopening to include “prior to the falling of the hammer.”
It’s important to note that the Virginia Supreme Court did not mandate the auctioneer reopen the bidding in this case, but left this, as state law infers, as an option. In other words, the auctioneer may reopen the bidding, or may not.
However, this ruling takes the word, “while” and changes it to “prior to or simultaneously with;” this is certainly a material difference.
Today, some 40 years later, would the Virginia Supreme Court come to this same conclusion? Would any other state supreme court rule in this same fashion? It comes as no surprise that this “reopen” question rarely gets a court’s attention, as this state law is fairly clear and well understood in the legal community.
And, isn’t it fair to wonder, “If a bid made while the hammer is falling can be recognized, why not a bid made just before the hammer starts to fall?”
Further, the laws relating to this issue consider the bid was “made,” but not necessarily, “received.” Therefore, if the bid was made either before or during the hammer’s descent, and the auctioneer didn’t receive it (didn’t see it, didn’t hear it …) then should the bid be considered, “made?”
Bids are offers. It seems that if an offer is made, but not received by the auctioneer, the auctioneer has no ability to accept it — he has no knowledge of it. If after he sells the item, another bidder then tells him of a prior offer — it’s too late, isn’t it? He’s already “sold it.”
The essence of the common interpretation of the UCC 2-328 (2) is that the auctioneer “receives” a bid as the hammer is falling. No, that’s not what the UCC 2-328 says, but most legal minds think of it that way. For instance, the auctioneer begins to say, “S O L … (receives a higher bid) D.”
This 1972 case certainly sheds light on this topic.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.