An Auctioneer is not Responsible for Implied Warranty of Title of an Item Sold at Auction only if s/he Discloses the Name of his/her Principal at the Time of Sale

In Universal C.I.T. Credit Corp. v. State Farm Mut. Auto. Ins. Co., 493 S.W.2d 385 (Mo. Ct. App. 1973), the court discussed if the auctioneer is responsible for the warranty of title of an item sold at auction. The Missouri Court of Appeals held that, according to the Missouri common law and the law in general, an auctioneer involved in an auction sale is deemed to be liable as a seller and has the burden of an implied warranty of title if the auctioneer has not disclosed the name of the original owner/dealer, i.e. his principal at the time of the auction sale. 

This case involved issues relating to the auction sale of a stolen vehicle.  In this case, Kansas City Automobile Auction Company (“Auction Co.”) sold the Dodge automobile (the vehicle in controversy) to Jack Banning Ford Sales, Inc. (“Banning”), who resold this to Donald L. Sensenich (“Sensenich”). This purchase was financed by Universal C.I.T. Credit Corporation (“CIT”).  Thereafter, the automobile was demolished in a highway accident and a related investigation followed, which revealed the fact that the automobile had been stolen prior to the time that it came into the hands of Auction Co..  Therefore, the auction sale on September 24, 1969, did not convey good title.  When Sensenich came to know this, he terminated any further payment to C.I.T., and he promptly gave notice to Banning of revocation of his acceptance of the automobile. Banning in turn gave notice to Auction Co., which denied liability. 
CIT brought a suit against Sensenich and against the insurer on an insurance policy to recover damages.  In turn, Sensenich filed a third-party petition against Banning for indemnity under an implied warranty of title. And Banning filed a fourth party petition against the Auction Co. for reimbursement under an implied warranty of title. The trial court entered a judgment in favor of CIT against Sensenich, a judgment in favor of Sensening against Banning, and in favor of the Banning against the Auction Co. The Auction Co. appealed. 

On appeal, the Auction Company argued that it was just an agent of the original dealer, and any implied warranties were those of its principal who was the dealer who had delivered the car for sale at auction. Id. at 389.
 
The Uniform Commercial Code, § 400.2-312 V.A.M.S., provides that there shall be a warranty that the title conveyed is good, except under "circumstances which give the buyer reason to know that the person selling does not claim title in himself . . ." The Court noted that the Auction Company relies upon the quoted words as exempting auctioneers, and also relies on § 13 of the Uniform Sales Act to become exempt from liability on implied warranty of title.Id.  The Court found that the Auction Co. cannot rely on this argument because Missouri never adopted the Uniform Sales Act. Id.  Therefore, the state’s common law should be relied for interpretation of the related provisions. See Safeway Stores, Inc. v. L. D. Schreiber Cheese Co., 326 F. Supp. 504, l.c. 510, n. 13.

The Court found that, under the common law of Missouri, as well as under the law generally, an auctioneer is liable as a seller and is held to the burdens of an implied warranty of title, unless the auctioneer discloses the name of his principal at the time of sale.Id. The Court referred to the case of Schell v. Stephens, 50 Mo. 375, l.c. 379 which states the above referred principle as follows:"’The mere fact that defendants were acting as auctioneers is not of itself notice that they were not selling their own goods, and they must be deemed to have been vendors, and responsible as such for title, unless they disclosed at the time the name of the principal.’" The Court also noted that the same rule has been followed in cases such as: Thompson, Payne & Co. v. Irwin, Allen & Co., 42 Mo.App. 403, l.c. 419; Dale v. Pierson -- Brewen Commission Co., 160 Mo. App. 314, 142 S.W. 745; and Pasley v. Ropp, Mo.App., 334 S.W.2d 254.Id.

The Court noted that the mere fact that a defendant is acting as an auctioneer does not constitute sufficient notice to provide the auctioneer immunity from liability. The auctioneer should disclose the name of its principal to be exempt from the implied warranty of title of the item sold at the auction sale. Id. In the instant case, the record shows that the principal’s name was not disclosed at the auction sale.  The Court noted that Auction Co.'s principal’s name was intentionally blocked out on the copy of the sales receipt delivered to Banning. Id. at 390. Further, the evidence by Auction Co. itself was that this practice was intentional in order to prevent the buying dealer from "going around" the Auction Company. Id. In addition, the Auction Co.'s general manager stated that a bidder was not advised and could not ascertain the name of the selling dealer until after the sale had already been consummated.Id. Therefore, based on the admitted facts noted above, the Court found that the Auction Co. must be held to the obligation of an implied warranty to Banning. Id. Additionally, the Court stated that the evidence shows that Banning did not have actual or constructive knowledge as to whether the Auction Co. was selling as agent or principal.  Therefore, the appellate court affirmed the trial court’s order against the Auction Co. Id.