Lesson. In Indiana auction sales of goods, the auction is final by the fall of the auctioneer’s hammer or other customary manner.
Legal issue. Whether a second auction of a good could be negated through a replevin action filed by the winning bidder in the first auction.
Vital facts. Auction Company sold a scaled model of a Picasso sculpture that had been donated to a school. A participant in the auction via telephone was the highest bidder at $20,000, and Auction Company announced the item as sold. The bidder then wired the necessary funds.
About a month later, a dispute arose in which certain city officials claimed there was inadequate or improper notice before the auction. The notice procedure is not pertinent to this post. The point is that the sale process was disputed, and the Auction Company held a second auction. A second individual placed a winning bid of $40,500 that he paid to the school. This second winning bidder then picked up the item.
Procedural history. The original bidder filed suit to obtain possession of the item. One of his claims was for replevin, and he filed a motion for summary judgment. The trial court granted the motion and ordered the subsequent bidder to relinquish possession of the model Picasso to the first bidder.
Key rules. Ind. Code § 26-1-2-328(2) provides in part that "[a] sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner." This statute is a UCC “Sales” (Article 2) provision applicable to the sale of a “good.”
Holding. The Indiana Court of Appeals affirmed the trial court.
Policy/rationale. At the heart of the dispute were statutory notice requirements applicable to a “distressed political subdivision” – an area of law far afield from my practice or this blog. What triggered my interest in Terrault was the replevin claim generally and the finality of the first auction specifically. The Court stated:
while the conditions to which (bidder 1) agreed when registering for the auction provided that the auctioneer may determine the successful bidder, continue bidding, cancel the sale, or reoffer an item, they do not provide that the School and [Auction Company] were able to take such actions after the winning bidder was determined. Indeed the terms provide that the highest bidder acknowledged by the auctioneer will be the purchaser and [Auction Company] acknowledged [bidder 1] as the highest bidder and received payment from him. Based on the designated evidence, the [city] and [Auction Company] had the authority to sell the model on behalf of the School, and the sale of the model on January 19, 2019, to [bidder 1] was valid.
The outcome here is consistent with sheriff’s sale case law in Indiana. As noted in my 11/15/19 post, In Re Collins, 2005 Bankr. LEXIS 1800 (S.D. Bankr. 2005) provided that: “[o]nce a sheriff’s sale takes place, a mortgage-debtor is no longer the title holder....” Judge Coachys concluded, in Collins, that a sheriff’s sale is complete when the hammer falls and that the actual delivery of the sheriff’s deed is purely ministerial.
I represent parties involved in connection with replevin actions and sheriff’s sales. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.