The New York Court of Appeals has set a hearing date on the appeal of the William J. Jenack action house of the Appellate Division’s ruling last year that an auctioneer must disclose the name of any owner who has consigned the work for sale, or a sale against a successful bidder cannot be enforced consistent with New York General Obligations law § 5-701 (the New York Statute of Frauds). The oral argument will be on November 13, 2013. The high court of New York elected to accept the appeal earlier this year, following coverage in the New York Times and elsewhere (in which the Art Law Report is quoted).
The case concerns a consignment auction that Jenack held, in which Albert Rabizadeh was the high bidder on an object described as “Fine Russian Silver/Enamel Covered Box with Gilt Interior, Signed I.P. Khlebnikov, 19th Century. Height 1½"; Top 2½" x 3 5/8",” believed to be the work of renowned silversmith Ivan Petrovich Khlebnikov. After the sale, however, Rabizadeh did not pay.
Jenack sued Rabizadeh and won in the trial court, but the Appellate Division focused on New York General Obligations law § 5-701(a)(6), governing agreements for “goods sold at public auction.” The statute requires that where the auctioneer makes a record at the time of the sale with ”the name of the purchaser, and the name of the person on whose account the sale was made, such memorandum is equivalent in effect to a note of the contract or sale, subscribed by the party to be charged therewith.” The Appellate Division ruled that by extension, an auction record that does not contain the name of the seller (the consignor) is not a contract consistent with § 5-701(a)(6). A great uproar ensued about the potential effect on the auction market.
The setting of the hearing date by the Court of Appeals follows the parties’ submission of their appellate briefs. Jenack, the petitioning party, focused on the same issues it did in the lower court. Namely, Jenack argued that the Appellate Division was too literal in disallowing reference in the auction materials to Jenack as an agent for an undisclosed seller to satisfy the state, and that the court should have followed an 1834 case (Hicks v. Wigmore) in which only the auctioneer was identified as an agent for the seller, yet the sale was upheld. It also includes considerable discussion of the effect that the decision will have on the auction industry, according to Jenack.
As to the first point, the key question is one of agency law, which governs what sort of party may bind another person. But those are general principles, and are always subject to qualification by statute. The Statute of Frauds is just such a law. As to the second argument, Jenack relies on a decision from nearly 200 years ago interpreting a principle similar to the law now on the books, but which predates the statute itself. Here, Jenack stretches the law a bit too thin; it is one thing to say that the high court should interpret a more recent law consistent with the same court’s approach to common law principles before the law was codified, it is entirely another to say that the lower court was required to take that view and committed reversible error by failing to do so.
As for Rabizadeh, defending an appeal allows for a necessarily minimalist approach; after all, he is content with the result below. His best argument is his simplest one: the auction house is not the seller, and the statute requires the name of the seller. He also disputes the supposed effect that the decision will have, but frankly on that question it should not matter to the Court of Appeals what the practical effect is; the legislature wrote the law and if it were a bad idea (which this is not to suggest that it is or isn’t), then it is for the legislature, not the courts, to change.
To this view, Rabizadeh has the better of the argument here on the law. The real problem with this case seemed to be the amount of proof. If Jenack had a document in its files with the seller’s name on it, under the logic of the Appellate Division decision the sale would likely have been upheld. For its own reasons (which are likely perfectly sound business practices), however, Jenack wishes to keep that information confidential. So long as it does, it risks the sale falling through.
It is always unwise to read too much into oral arguments, but it should certainly be interesting.
