An Owner would have to pay an Auctioneer Reasonable Compensation for Services and Expenses Incurred in Preparing for Sale if s/he/it Withdraws his/her/its Property from an Auction Sale

The Kentucky Court of Appeals in Greer v. Arnold, 633 S.W.2d 75 (Ky. Ct. App. 1982) held that the breach of an auction sale contract, which does not include in the contract any language that the auctioneers have an exclusive right to sell the property, would have to be treated under general principles of damages for a breach of contract.  Therefore, in the event of breach of an auction contract, an auctioneer may recover from the property owner reasonable compensation for the services and the expenses incurred in preparation for the sale.  However, the owner need not pay the auctioneer’s commission.  

This case related to the breach of an auction sale contract and the computation of the resulting damages.  In this case, Greer (“Appellant”) signed a contract with the auctioneers (“Auctioneers”) authorizing them to auction a house, lot, and personal property.  After that, the Appellant gave the real estate company of Snyder and Howard (“Realtors”) an exclusive right to sell his house and lot.  The Realtors negotiated a sale and a deed was executed pursuant to the contract.  The Auctioneers auctioned Appellant’s personal property and sent sale proceeds to the Appellant after reducing their commission amount from the sale proceeds.  Thereafter, the auctioneer demanded commission on the sale of the real estate.  However, the Appellant refused to pay commission for the real estate sale.  Consequently, the auctioneers filed a suit to recover commission.  The trial court awarded the Auctioneers a full commission for the real estate that was sold by the Realtors.  This appeal followed.  

The Court of Appeals noted that the contract between Appellant and the Auctioneer was an auction sales contract. Id. at 76. Such agreements generally include details such as: items to be sold, when the auction was to take place, and the amount of the commission. Id.  The agreement does not state that the Auctioneers have an exclusive right to sell the property. Id.  Additionally, the agreement is ambiguous as to whether the auction, if held, would be absolute and without any reservation. Id.  

The Court found that the breach of an auction contract is to be treated under general principles of damages for a breach of contract. Id. at 77.  The Court stated that the Appellant’s measure of damages was basically correct. Id.  The Auctioneers would be entitled to recover their expenses and a reasonable compensation for services rendered, in the event of an auction contract breach. Id.  

The Court referred to Becker court’s opinion: “While the contract provided that Miss Becker would confirm the sale at the highest price obtainable, it did not take from her the right to stop the sale before the property was knocked down, and where the property was selling at a ruinous sacrifice. In fact she did stop the sale.” Id. (quoting Becker v. Crabb, 223 Ky. 549, 551 (1928))

The Court stated that, “if a party can withdraw from selling his property during an absolute auction, he can certainly withdraw or dispose of his property prior to the beginning of the auction.” Id.   An auctioneer may recover against an owner who withdraws property from the auction sale for his reasonable compensation or expenses, although he is not entitled to his commissions. Id. 7 Am.Jur.2d, Auctions and Auctioneers, § 61 (1980), at 413, Becker v. Crabb, supra.  

The Court also noted that, 37 A.L.R.2d 1049 (1954), provides an annotation on the withdrawal of property from an auction sale. Id.  Section 8 covers liability and remedies, which reads as below:  Where the owner of goods withdraws them from an auction sale prior to its commencement, he is liable to the auctioneer for any expenses incurred in preparation for the sale, but not for commissions. Id. ( citing Girardey & Co. v. Stone, (1872), 24 La.Ann. 286.)

The Court concluded that the auction contract in this case is not comparable to an exclusive listing. Id.   The auctioneers cannot recover a commission based on the selling price of the real property, which was sold in breach of their contract. Id.   The Court stated that Auctioneer may recover only their expenses in the preparation for a sale and a reasonable compensation for any services. Id.   Therefore the Court of Appeals reversed and remanded the trial court's judgment in favor of the auctioneers for a new trial on the issue of damages only. Id.   
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