A Property may be Removed From Public Auction Before the Auction Begins

The Michigan Court of Appeals stated that the general rule relating to auction sale is that property may be removed from an auction until bidding has commenced. J & L Inv. Co., LLC v. Department of Natural Resources, 233 Mich. App. 544, 548 (Mich. Ct. App. 1999) [Anno: Withdrawal of property from auction sale], 37 ALR2d 1049. However, for reserve auction, the seller may remove property up to the point where a bid is accepted. Id.

In  J & L Inv. Co., LLC , the appellate court discussed the issue as to when a property could be withdrawn from public auction.  In this case, the Plaintiff-Appellant (“Appellant”) auction bidder filed suit against Defendant Department of Natural Resources and Defendant real estate division employee (“Defendants”) alleging that they wrongfully withdrew certain parcels of land from a public auction. Appellant pointed out that the representations contained in Defendants’ public auction booklet and longstanding policies made a commitment to sell to the property to the highest bidder based.  But the Defendants removed the parcels before the auction to sell to the city planner.  Consequently, the Appellant moved to the trial court seeking equitable relief and a declaration that Defendants act of removing certain parcels of land from a public auction was not proper. The circuit court granted Defendants’ motion for summary judgment.  This appeal followed. 

The trial court reasoned that general auction law applies to decide the question as to when property may be withdrawn from an auction. Id. at 548. The statutory scheme dealing with the circumstances in which state property may be publicly auctioned was never intended to supersede general auction law. Id.

The appellate court found that in the instant case, the property at issue was removed from auction before the actual auction began. Id. Nothing in the applicable statutory language, the Department’s Public Auction Sale Land Booklet, or the letter to the City of Lansing created an obligation on the part of the Department or the real estate division employee to offer the property for sale or an opportunity to bid at the public auction. Id.

The appellate court found that Michigan law referred to by the Appellants (MCL 211.131(1) and MCL § 324.2101) do not address when Defendant may withdraw Property from a public auction for a state use or for sale to some other governmental unit. Id. at 550. Therefore, the appellate court found that the trial court correctly concluded that nothing in the applicable statutory language was "intended to supersede general auction law as it relates to when property may be withdrawn from an auction" because anything that was not part of the Legislature's intent must not be read into these provisions. Id. In re Marin, 198 Mich. App. 560, 564; 499 N.W.2d 400 (1993). Again, since the applicable statutory language does not indicate anything to the contrary, it should be interpreted with reference to established rules of common law and given its common-law meaning. Id. Nummer, supra; Mayhall, supra.

The appellate court stated that the trial court correctly noted that there are no "Michigan case law dealing with the right of a seller to withdraw property from an auction.” Id. at 551. However, in other jurisdictions auctions are presumed to be held "with reserve," i.e., the owner reserves the right not to sell, unless otherwise specified. Pyles v Goller, 109 Md. App. 71, 81; 674 A.2d 35 (1996); Cuba v Hudson & Marshall, Inc, 213 Ga. App. 639, 639; 445 S.E.2d 386 (1994); 1 Corbin, Contracts (rev ed, 1993), § 4.14, pp 638-639. Id. Placing property up for bid at an auction held "with reserve," is considered an invitation, and not an offer, to contract. Pyles, supra; Corbin, § 4.14, pp 638-639. Id Therefore, an owner may withdraw the property from sale any time before the auctioneer signifies acceptance of the highest bid, i.e., at the "fall of the hammer." Id. Pyles, supra; Cuba, supra; New York Guardian Mortgage Co v Brokenborough, 394 Pa. Super. 105, 107; 575 A.2d 121 (1990); 7A CJS, Auctions & Auctioneers, § 11, p 869; 37 ALR2d 1049, § 2[a]; Corbin, § 4.14, pp 638-639.

 On reviewing the trial court records, the appellate court stated that nothing in the records suggests that the auction in question would be held "without reserve." Id. The court further found that the "Public Auction State Land" booklet, referred to in the Appellant’s complaint provides that "the Natural Resources Department reserves the right to reject any or all bids." Id. at 552.
In light of the analysis above, the appellate court concluded that Defendant Department  had the right to withdraw the subject parcels from the auction any time before the "fall of the hammer" on the auction day. Id. Pyles, supra; Cuba, supra; Brokenborough, supra; 7A CJS, p 869; Corbin,  [**200]  § 4.14, pp 638-639.

The Michigan Court of Appeals held that the Defendants properly withdrew the parcels of land in question before the public auction began.