In New Jersey, Municipalities can adopt ordinances to license and regulate auctioneers and their businesses

The Supreme Court of New Jersey in B. JESELSHON, INC. v. CITY OF ATL. CITY, 70 N.J. 238 (N.J. 1976) held that it was a reasonable exercise of police power for the municipality to adopt ordinances to regulate auction businesses in New Jersey.  The New Jersey statute empowers governing body of the municipality to adopt ordinances and regulations necessary to protect the public against fraud at public auction sales.  

In this case the Plaintiffs (“Plaintiffs”), auctioneers doing business in the Atlantic City questioned the validity of an ordinance that was adopted by the City to regulate auction sales.  The ordinance required auctioneers to refund in full the purchase price of an item when the demand was made within 72 hours after the purchase.  However, the purchaser could return the article or merchandise only if: 1) the item was in the same condition as when purchased; and 2) the item was returned to the place of purchase.  The trial court found that such regulation was a proper exercise of municipality’s police powers and upheld the validity of the ordinance.  The Appellate Division affirmed this decision.  Consequently, Plaintiffs appealed.   

On appeal, the Plaintiffs contended that the ordinance impaired the right to contract and constituted imprisonment for debt. Id. at 241.   

The Court found that Plaintiffs contentions were of no merit. Id.  The penalty provision in the ordinance which permitted the imposition of a jail term is for the public injury involved.  This provision does not imprison for debt. Id.  It only penalizes the auctioneer who has offended against the right of the public to a refund of the purchase price upon proper demand and return of the goods. Id.  See State Board of Medical Examiners v. Kornreich, 136 N.J.L. 367 (Sup. Ct. 1947).  The Court stated that contract rights and property rights are not absolute rights. Id. at 242.  These rights are always exercised subject to the legitimate exercise of the police power. Id. ( citing Inganamort v. Borough of Fort Lee, 62 N.J.521 (1973)) 

The Court noted that, according to N.J.S.A. 40:52-1(i), municipalities may adopt ordinances to license and regulate auctioneers and their businesses. Id.  They can also make such regulations as the governing body of the municipality deem necessary to protect the public against fraud at public auction sales. Id.  

The Court did not find any conflict between the relevant provisions of the Uniform Commercial Code and the ordinance. Id. at 243.  The Court noted that pertinent part of N.J.S.A. 12A:2-328 which deals with auction sale by reads as follows: “A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner. Where a bid is made while the hammer is falling in acceptance of a prior bid the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling.” Id.  

The Court stated that, from the draftsman's comment appended to paragraph (2) it is clear that this provision governed the finality of auction sales when a bid was made while the hammer is falling. Id.  The provision was not intended to restrict the appropriate exercise of governmental authority over auction sales for the public good and welfare. Id.  

The Court stated that the provisions of N.J.S.A. 40:52-1 would have little meaning if the Court was to accept the Plaintiff’s arguments. Id. at 244.  The Court concluded that the said ordinance is a reasonable restriction on the business of auction sales and is in all respects a lawful exercise of municipal power under N.J.S.A. 40:52-1. Id.  Therefore, the Court affirmed the appellate court’s decision. Id.