A Sales Company Which Innocently Sells Stolen Property At Public Auction Can Be Held Liable To The Buyer For The Failure Of Title If It Does Not Disclose Principal’s Name

The Supreme Court of Arkansas in Oliver v. Eureka Springs Sales Co., 257 S.W.2d 367 (Ark. 1953) held that a party acting as a principal’s agent can escape from liability to a buyer for failure of title only if he discloses his principal’s identity. The case discussed below involved an auction sale of stolen animals by a sales company.  The Court had to decide if the sales company could be held liable to the buyer for failure of title when it auctioned and sold the stolen property innocently.   

The Eureka Springs Sales Company (“Sales Company”) owned a sales barn at which livestock were regularly sold at auction.  At one such auction, Oliver (the “Purchaser”) was the highest successful bidder and he purchased three heifers from the Sales Company.  The animals that were sold were actually stolen property.  The Purchaser paid the value of the animals to the actual owner and after that brought an action against the Sales Company to recover the bid amount.  The trial court ruled in favor of the Sales Company.  The court held that the Sales Company did not know that the animals that were sold at auction were actually stolen animals.  The trial court stated that the Sales Company acted only as an agent or broker for Harve Hopper, who had employed the Sales Company to sell their property (heifers) on a commission basis.  This appeal followed. 

The Supreme Court found that Sales Company did not play the broker’s role because it had been entrusted with the custody of the animals. Id. at 368. (citing Harby v. City of Hot Springs, Ark., 11 S. W. 694.)  The Court found that the Sales Company was acting as Hopper's agent. Id.  Therefore, the Sales Company can escape liability only if it shows that the identity of its principal was disclosed. Id. The Court found that there is no testimony to show that the principal’s identity was disclosed. Id. The Purchaser testified that he believed that the Sales Company owned the animals offered for sale. Id. Therefore, per Purchaser’s understanding, Hopper was an undisclosed principal. Id. In this scenario, the Court found that the Purchaser may treat the Sales Company as a party to the contract. Id.  (citing Shelby v. Burrow, 76 Ark. 558, 89 S. W. 464, 1 L. R. A., N. S. 303.)

The Court further stated that, at most, the Purchaser would have only realized that the Sales Company was acting as the agent of some unnamed principal. Id.  If so, the principal was only partially disclosed, and the Purchaser could enforce the contract as against the agent. Id.  (citing Cooley v. Ksir, 105 Ark. 307, 151 S. W. 254, 43 L. R. A., N. S. 527.)  The Court stated that the Purchaser did not have a duty to find out the true seller’s identity by examining the Sales Company's books. Id.  The Court reversed the trial court’s decision.  Id.