In an Auction with Reserve the Auctioneer May Withdraw the Goods at Any Time Before the Completion of Sale

Court of Appeals in Texas in McDonald v. The Boat Barn, 994 S.W.2d 763 (Tex. App. Houston 1st Dist. 1999) held that in an auction ‘with reserve’ the auctioneer may withdraw the goods from sale at any time until the auctioneer announces completion of the sale. Id at  765.

In this case, Cotton McDonald and Stoney McDonald (“Appellants”) were the highest bidders in an auction sale of the contents of a self-storage unit. The contents were being auctioned because the owner of the property (“owner”) failed to pay rent owed to Appellee Boat Barn (“Appellee”) for the lease of the unit.  On the auction day before the opening of the sealed bid, owner called Appellee and said he will pay back all his rent on next day and did so.  

Therefore, prior to accepting the bid, Appellee withdrew the property from the auction Appellant sued Appellee for breach of contract and breach of the Deceptive Trade Practices-Consumer Protection Act. The trial court entered summary judgment for Appellant. The court of appeals affirmed the judgment.  The appellate court held that the auction being “with reserve," the property could be withdrawn prior to completion of the sale.

Appellants in this case argued that the chapter 59 of the Texas Property Code required the Appellee to accept their high bid. Appellants placed special emphasis on section 59.045of Tex Prop Code which states “The lessor must…… sell the property to the highest bidder”. Id. at 764.
    
The court stated that the dictates of the chapter 59 are followed only when the sale is complete.  The court also observed that, under the Uniform Commercial Code (UCC)--Sales, "[A] sale by auction is with reserve unless the goods are in explicit terms put up without reserve." Id. Texas Business and Commercial Code. § 2.328(c) (Vernon 1994). "In an auction with reserve the auctioneer may withdraw the goods at any time until the auctioneer announces completion of the sale." Id. at 764-65. The UCC presumes an auction is with reserve and allows the auctioneer to withdraw the goods up until the time sale is completed. Id. At 764-765. 
    
The Court of Appeals stated there was no conflict between the UCC and Property Code section 59.045.  The UCC allows the lessor to withdraw an item from sale, while section 59.045 requires the lessor to sell to the highest bidder if there is a sale. In the case at hand, the court found that the sale had not been completed and held that under the facts of this case, appellee was not required by chapter 59 to accept the appellant’s bid. Id. at 763,764-765.  The Court found that the auction was a ‘with reserve auction’ and so the property could be withdrawn from sale before the completion of sale.    Id. at765.