An Auctioneer who fails to Disclose his Principal is Deemed to Warrant Title to Goods that s/he sells. An Auctioneer can Protect Himself by Disclosing his/her Principal

The Supreme Court of Mississippi in Jones v. Ballard, 573 So. 2d 783 (Miss. 1990) held that an auctioneer who sells a good/product concealing the name of his principal is considered to be a seller and is responsible to the buyer for deficiency in title of the goods sold.  Such an auctioneer deems to warrant the title to the goods that he sells. He can protect himself from this liability by revealing the name of his principal.   

In this case, Bill Jones (“Auctioneer”) who is engaged in the auction business sold to the purchaser a backhoe that had been delivered to him under a consignment agreement. The Auctioneer did not disclose his principal at the auction sale. The purchaser improved the backhoe and sold it to third party.  Shortly, a state law enforcement official contacted the new owner.  They found that the backhoe had been stolen some time back and took possession of it. The new owner received restitution from the purchaser.  The purchaser then filed a lawsuit against the auctioneer and the trial court granted summary judgment to the purchaser. The auctioneer sought review.

The Court stated that the auction sale in question was a conventional public sale held at the Auctioneer’s auction house in Mississippi. Id. at 785.  In an auction sale, an auctioneer impliedly warrants that he has title to that which he sells. Id.   An auctioneer who sells property without revealing the name of his principal is considered to be a vendor responsible to the purchaser for any deficiency in the title in the goods conveyed. Id. (citing  McElroy v. Long, 170 F.2d 345, 347 (5th Cir. 1948)). 

The Court noted that the rule, an auctioneer who fails to disclose his principal is deemed to warrant title to goods he sells, is widely accepted in other states. Id.  The following are some cases in which this rule was followed: Universal C.I.T. Credit Corp. v. State Farm Mutual Automobile Insurance Co., 493 S.W. 2d 385, 390 (Mo. App. 1973); Abercrombie v. Nashville Auto Auction, Inc., 541 So.2d 516, 518 (Ala. 1989); Michigan National Bank v. Michigan Livestock Exchange, 432 Mich. 277, 439 N.W.2d 884, 886 (1989); Masoud v. Ban Credit Service Agency, 128 Misc.2d 642, 494 N.Y.Supp.2d 598, 600 (1985); Oliver v. Eureka Springs Sales Co., 222 Ark. 94, 257 S.W.2d 367, 368 (1953). Id.  
The Universal C.I.T court noted stated as below:

The mere fact that a defendant is acting as an auctioneer is not in itself sufficient notice to provide immunity from liability. The requirement is that auctioneer disclose the name of its principal, and the record in this case is abundantly clear that this was not done. . . .[Moreover,. . .the] bidder was not advised and could not ascertain the name of the selling dealer until after the sale had already been consummated. Under these admitted facts, Auction Company must be held to the obligation of an implied warranty to Banning. . . .
 Id. at 785-86 (quoting Universal C.I.T., 493 S.W.2d at 391.)

The rule of implied warranty discussed above relies on the theory that an auctioneer is in a better position than the purchaser at an auction to determine the title to property being sold which would indicate the true owners. Id. at 786 (internal citations omitted).  Under the rule the auctioneer may protect himself by the simply disclosing the name of his principal. Id.  

The facts presented before the Court (Affidavits of Barney Barefield and the purchaser Ballard) show that the auctioneer did not disclose the name of his principal at the auction. Id.  Further, Ballard stated that he relied on the Auctioneer’s reputation in making the decision to purchase the backhoe. Id.  
Based on the discussions above, the Court found that the Auctioneer conducted the auction sale without disclosing his principal. Id.   Therefore, he deemed to warrant title to the backhoe that he sold. Id.