When an Auction Sale is not declared “Without Reserve,” the General rule is that a Seller or an Auctioneer can Withdraw Goods from Sale at any time before the Auctioneer Accepts the Bid and Announces Completion of Sale

In Equitable Life Assurance Society of the United States v First National Bank, 602 N.W.2d 291 (S.D. 1999), the Supreme Court of South Dakota held that an auction sale that is not advertised as one "without reserve," should be presumed to be a sale with reserve.  In an auction ‘with reserve’ the auctioneer may withdraw goods at any time until he announces completion of the sale.  When an auction sale is not declared “without reserve,” the general rule is that a property owner/seller or the auctioneer may withdraw the property from sale at any time before the acceptance of a bid.  A bid constitutes simply an offer for a contract and until it is accepted there is no contract between the parties.
 
This case related to an auction sale pursuant to a judgment of foreclosure.  In this case, the Plaintiff mortgagee, Equitable Life Assurance Society of the United States (“Equitable”) obtained a judgment of foreclosure on defendant mortgagor's property, authorizing its sale at auction on October 15.  On October 14, defendant bank entered into an agreement with Plaintiff to buy Plaintiff's interest in the mortgage.  Plaintiff's attorney could not reach the sheriff to cancel the sale on that day.  However, he connected with the Sheriff by interrupting the auction in progress.  But the sheriff disregarded plaintiff's wishes and moved with the sale and sold the property to the highest bidder.  The Circuit Court confirmed the auction sale and this appeal followed. 

 On appeal, the appellate court had to decide whether or not a sheriff's sale of real property conducted in connection with a Judgment of Foreclosure can be canceled by the mortgagee after the auction and the bidding started. Id. at 294.  Equitable claimed that the circuit court erred in holding as a matter of law that a sheriff's execution sale is a sale "without reserve." Id. 

In order to find an answer to the above question, the Court had to first find out whether the auction sale in question was one “with reserve.”  The Court stated that, in an auction with reserve the auctioneer may withdraw the goods at any time before the sale is announced as complete. Id.  In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time. Id.  SDCL 57A-2-328(3); see also 7 AmJur2d Auctions and Auctioneers § 17 (1980).

The Court observed that, in the instant case, no fact show that the sale was advertised as one "without reserve."  Therefore, the sheriff's sale should be presumed to be a sale “with reserve.”  When a sale is not declared as "without reserve," the general rule is that the property owner or the auctioneer (in this case the sheriff) can withdraw the property from sale at any time before the acceptance of a bid. Id. A bid is an offer alone and until it is accepted there is no contract between the parties. Id. at 294-95.

In light of the Foreclosure and Sale Judgment, the sheriff's role was that of an auctioneer.  Generally, an auctioneer is the agent of the person whose property the auctioneer sells. Id. at 295.   Re Premier Container Corp., 95 Misc. 2d 859, 408 N.Y.S.2d 725, 729 (NY Sup Ct 1978); 7 AmJur2d Auctions and Auctioneers § 55 (1996).  An auctioneer in his role as an agent of the seller must act in good faith and in the interest of the principal, and make the sale by following the principal’s instructions. Id.    SDCL 59-8-1 which states that "an auctioneer in the absence of special authorization or usage to the contrary, has authority from the seller . . ."  also supports this concept. Id. 

The Court found that the sheriff conducting the public auction obtains his authority from the mortgagee, it logically follows the mortgagee can strip the sheriff's authority for conducting the sale. Id.  "The right, under appropriate circumstances, to order a delay in making an execution sale, has been recognized on the ground that an execution is the process of the judgment creditor and is under his control." Id.  .  30 AmJur2d Executions § 475 (1994).
There is no dispute that the sheriff was notified before the fall of hammer that Equitable intended to cancel the sale.  Equitable, as mortgagee, not the sheriff, had the power of sale. Id.  The Court found that Equitable had the legal authority and right to direct the sheriff to cancel the sale. Id. 

 The Court concluded that the trial court erred when it ruled as a matter of law the sheriff's sale was "without reserve" as there was no factual basis because the Notice of the Sheriff's sale indicated the sale was to be "with reserve." Id.  The Court reversed the circuit court's order confirming the sale and order the parties be returned to their positions as if the sale had been canceled on October 15, 1998. Id.