Fiduciary Duty of an Auctioneer

An auctioneer’s fiduciary duty is to the seller. This means the auctioneer is an agent for the seller and must act in the best interests of the seller.

This falls back on the basis of general law, widely accepted in all courts of law throughout the U.S.:
(1) “Fiduciary” means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument (i.e. “contract”).
(2) “Represented person” means the principal, beneficiary, partnership, corporation, or other person to whom the duty stated in subdivision (1) is owed.

In addition, the field of real estate is usually quoted in many examples because they are basically the only industry that allows for “dual agency”. However, to completely understand this “agency”, you must understand that the Broker has ultimate responsibility for all transactions by any salespersons working under the supervision of the Broker’s license, therefore the actual Broker is undertaking the role of dual agency (not the individual salespersons, as I will explain). In other words, the Broker can not be a direct party in the transaction (in any way and must remain neutral, or without specific directions to either salesperson) and will appoint two different salespersons to work for the seller and the buyer, since an individual agent cannot represent a fiduciary to both. On the same basis of law, if a RE salesperson has not specifically contracted to act as a buyer’s agent, then it is automatically assumed that the salesperson is acting on behalf of the seller, therefore is the fiduciary only for the seller.

To support that last statement, the Federal Trade Commission (FTC) speaks of this in numerous publications, one of which is:
http://www.ftc.gov/os/comments/realestatecompetition/518795-00391.htm
Fiduciaries are held to a higher standard under common law. Upon visiting, for example, a store, a consumer does not expect, or have any right to expect, the store’s salesperson to be looking out for the consumer’s best interest. But in hiring a trusted lawyer or real estate agent or investment trust company (you may also add “auctioneer”) to act for him, a client expects full fiduciary responsibility, including undivided loyalty, with no undisclosed conflicts of interest. Consumers are more easily misled when, as clients, not just customers, they are giving their trust to their own professional fiduciary.

In addition, you can find additional commentary on the basis of fiduciary duties at:
http://en.wikipedia.org/wiki/Fiduciary
Conflict of duty and duty
A fiduciary’s duty must not conflict with another fiduciary duty. Conflicts between one fiduciary duty and another fiduciary duty arise most often when a lawyer or an agent, such as a real estate agent (also add “auctioneer”), represent more than one client, and the interests of those clients conflict. This usually occurs when a lawyer attempts to represent both the plaintiff and the defendant in the same matter, for example. The rule comes from the logical conclusion that a fiduciary cannot make the principal’s interests a top priority if he has two principals and their interests are diametrically opposed; he must balance the interests, which is not acceptable to equity. Therefore, the conflict of duty and duty rule is really an extension of the conflict of interest and duty rules.”

Also see:
http://en.wikipedia.org/wiki/Conflict_of_interest

In other words, as a sole individual/entity, you can not have a conflict of fiduciary duties between the parties, or you are subject to a dereliction of duty to one or both parties. Therefore, under the basis of general law, it basically means that when an auctioneer signs a contract with a seller (the principal), the auctioneer has a fiduciary duty to the seller to act as their primary agent on their behalf and in their best interests or “as they would act”.

Now, this does not mean that if the seller misrepresents something, that the auctioneer doesn’t have a “duty” to the buyer to correct the problem. However, the auctioneer and the seller are both responsible for providing a reasonable duty to provide said goods in the condition stated for the agreed upon price/trade, as this falls under the Fair Trade Agreement statutes (that you can also search for under the FTC’s website). However, this does not create a fiduciary duty to the buyer, but only serves to treat the buyer fairly under the FTC’s Fair Trade Agreement.

The primary point is regarding the auctioneer’s fiduciary duty to act on behalf of the seller. The difference between the Fair Trade Act regarding buyers and fiduciary duty to the client (seller) is the same, regardless of whether it is a real estate transaction or the sale of any other type of property.

A Fiduciary can not represent two different parties with opposing intents. The primary fiduciary is to the client that has contracted the auctioneer to sell (act on their behalf for the sale of) their goods.

Some have attempted to imply that the Terms and Conditions of Sale implies a fiduciary duty. This is not the case, as the FTC’s Fair Trade Act specifically demonstrates that it is only an agreement for the terms of the sale and creates no other duty upon the seller (or their agent) as a representative of the buyer, as they are opposing parties until the final agreement has been reached. The Terms & Conditions (terms of their agreement) for an auction are only the conditions of finalizing the transaction, which both, the buyer and the auctioneer (seller’s fiduciary agent) are agreeing to as part of the sale, with only price being the final factor and determined upon the call of “Sold”. Therefore, the auctioneer has only “perfected a sales agreement” (that’s how a lawyer would state it) with the buyer on behalf of the seller (the principal fiduciary).

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6 Responses to Fiduciary Duty of an Auctioneer

  1. joan says:

    Is an auction company allowed unannounced on the same day of the auction to set up shop & clutter the home owner’s home with his Art with no room to move, statues in ur back yard, etc, being his sole purpose really is to sell all his products and slip in the sale of your home under what is on the contract.
    Using the contract as a decor & gimmick for the auction company to use ur home to sell his Art at your expense and your risk.

  2. Auction Law says:

    Joan
    You bring up some good points for deliberation, and it could initiate a separate article to address the points.

    It does make one wonder who the auctioneer is actually representing, but let’s take a look at the possible reasons why this might take place, as well as the ethics behind it.

    If the estate/home didn’t have enough merchandise or type of merchandise to draw a good crowd, the auctioneer may consider adding other goods to the sale, in an attempt to get the buyer’s interest. Of course, this should be included in the contract and approved by the seller.

    If the auctioneer did not have the seller’s prior approval, then this is unethical and may also have other legal issues involved, which may include deceptive trade practices.

    In addition, if the auctioneer did not disclose in advertisements, that other consignments were included in the sale, the auctioneer could also be prosecuted for deceptive trade practices.

    I base the above responses on the fact that there was an auctioneer who was fined by the licensing board in Texas for doing the same type of things.

    If the auctioneer brought in goods without your previous knowledge and consent, I would certainly question the motives of the individual and whether he/she was fully representing the interests of the seller.

  3. JOAN says:

    thank u for u quick response. please read
    what can been done? asap

    [Edited Comments: Auction name & website removed by moderator. This is not to protect the auctioneer, but to protect both parties from potential libel. Civil or criminal actions should be filed as a matter of public record, prior to using specific personal info. – I will allow, that the auctioneer accused is in Miami Florida.]
    No consignments were ever mentioned in his ads. U can see an example OF WHAT IS SAID ON THE OWNERS ADS WHICH LIST HIS THINGS on their website. Zoom in on the ads and u’ll see ADDITIONAL PERSONAL PROPERTY FEATURES: THEN it will list similar things as mine did. Miine said ADDITONAL PERSONAL PROPERTY FEATURES: LALIQUE ORIENTAL RUGS, CUT CRYSTAL, SILVER, ARTWORK BY IMPORTANT ARTISTS INCLUDING WIFREDO LAM, PICASSO, CHACALL, ERTE, BRITTO, AND ANY (SHOULD BE MANY) MORE BRONZE STATUARY AND FOUNTAIN- ESTATE JEWELRY? and up to (350) more items.
    WHAT! NOT ONE OF THESE THESE THINGS BELONG TO ME
    NO CONSIGMENT IS MENTIONED!
    This website is not updated. AT our first meeting [the auctioneer] assured me people could bid on line when I asked him. NO problem. The girls would set it up at the office. NOT!
    No one from the office ever called me to ask or discuss what I wanted to put on the ad as far as personal property. Nor spoke about what it would say, nor faxed any proofs before being sent out. Never saw ad for the papers, or media.

    I can not speak for you or anyone else but when I’m being charged $5000 supposingly for ads that’s a lot of money to be spending on any ad, let alone have no communications at all no meeting of the minds from [the auctioneer] or his office. Nothing. [The auctioneer] just showed up with his ad and what it says. He just says let him do his work. SO u expect him to do exactly the best possible for 5000.
    The last Ad I received at the house stated up to 350 items were being sold. No comments from [the auctioneer], so I thought it was just to lure the people in, as he reassured me from the beginning. NOT!

    This man bragged to me how he has a 100,000 up front advertising expenses for his next home auction.
    This is just nuts. This mans intentions have nothing to do with selling ur home getting 60-70 people to your home just to bid on ur home as he told me from the great responses he received from qualified buyers.

    This man had alternative motives with me. I went along with everything this man told me not realizing I was being set up all along with his alternative intentions for July 4, 2008. I had no idea what was in store for me.
    I had no idea truck loads of his items would be showing up at my drive way. NO approval no discussion nothing.
    I was shocked. I told them to keep them in the trucks do not unload their goods. Some one called [the auctioneer] and they began to unload. I could not stop them. They simply took over my home and back yard with as much stuff as they could.
    It was like I was not even there as they passed me going into my home with the ARTWORK and rugs.

    I was assured a few weeks prior to the auction [the auctioneer] was getting great responses. He told me he expected (60-70 PEOPLE AT MY HOME TO BID ON MY HOME). WHo would not get EXCITED. He tells me the ads with the art work works everytime. Little did I know this mans true intentions until the morning of this auction.
    It was just me, at least 10- 15 employees and [auctioneer] who invaded my home with all his stuff.

    I finally found [the auctioneer] in my back yard the morning of the Auction
    I wanted to speak with him about this intrution of all his things, the truck loads and my cluttered home, and most of his employees acting like what the heck was I doing there. [Auctioneer was] setting up a table in the back yard when he shockingly tells me he’s really here to only sell his ART WORK. I said I knew something was up when ur truck loads of stuff showed up at my home. U told me 60-70 interested parties were coming to bid on my home. He tells me now no around 30 people are coming to my ART SHOW AND AUCTION. I was totally shocked.
    So I tell him it’s not going to take place in my home and I’m calling this off right now. I asked him to tell his people to pack up those trucks and leave my home. He says tells me he was not leaving, I”m under obligation to him, to go read the contract. He laughed and continued on setting up his table. He tried to intimidate me with his contract. I went in the house told everyone to start packing up the auction was not happening. One went out to speak with [the auctioneer] came back in and they acted, acted like I was not even there. That my home was theirs, they just kept on doing their things, having a great time getting ready for their crowd not mine.

    I felt like I was in twilight zone. This could not be really happening. It was my big day & the 4th of july.
    Then I realized they probably have done this before or perhaps many times before. One word from their boss and it didn’t matter what the homeowner told them to do.
    I realized then that I had been had, by an old timer con who used “AUCTION” to his advantage & for years. This man knows how to work homeowners to his total advantage and ur total disadvantage. He knows every angle.
    I tried calling a few friends who were cops, but naturally they were out of town on July 4th. I should have called the police.
    I was over whelmed, it was just myself and his entire staff invading my home now to SELL HIS ART AND HE THinks THERE is nothing at the moment I can do. At least not until he gets as many items sold as possible, at least the expensive ones. [The Auctioneer] had his dealers working the people as they came in the house. In the mean time he was doing his auctioning out the back. My home was the last thing on this mans mind. Forget about anything in my home I thought was going to be auctioned. That was never going to happen.
    One dealer had Picasso, etc on the floor with other paintngs stacked behind them which were only standing by leaning up by my furniture which was unsteady to begin with. I had to show her how to at least get it where it would not tip over. Other art work was on top of my furniture so it could not been seen to be sold no matter what I said.
    The dealer told me they had more ART which was more expensive than those at 35-45thousand, the Picasso and a few others a pop. I was shocked.
    Then I thought what kind of art dealers are these people.
    WHO IN THE WORLD, I MEAN ANY ART DEALER WHO APPRECIATES DELICATE ART WORK WOULD NEVER IN THEIR RIGHT EVER ALLOWS THIS KIND of handling of expensive art.
    TO BE DISPLAYED ON THE FLOOR WITH OTHER ART leaning against it from behind? NO COVERING INBETWEEN THEM LET ALONE TOUCHING ONE ANOTHER. It was like this all over my home.
    IT JUST WASN’T RIGHT! Who were these dealers? Then every person coming in my home knew everyone. Like one big happy family. Expensive things were selling fast. New stuff would be brought in from the garage as things were sold. It was ridiculous. Very few came for the sale of my home, only 3 two of which leave others left not knowing what time
    it was a huge loss for me.
    They had me and they knew it. I did not know these people, nor if the art was real, or copies, or perhaps stolen along the way. Who knows. It was not handled professionally.
    Then a thought came to me. What a great way for these people to sell copies, fakes, or perhaps stolen items along the way quickly, quietly & very privately in private neighborhoods, up scale without being noticed. Home to home across the US> WHAT NOT!
    These people are in and out before the home owner knows what hit them. This man uses his sales charms then hits you with his intimidating contract tactics if u attempt to get in his way as he proved with me. He gets u exactly where he want u sells his art slips in ur home goes back to selling, wheel and dealing and his done. Out of ur life and never has to see u again.

    This is exactly what he thought he was going to do to me, but this time I’m not going let him get away with it if I can help it. This man had me unbeknown to me as soon as the contract was signed. Or he thought!
    I had my suspicions along the way but I wanted to believe he was telling me the truth about the 60- 70 people really interested about my home and coming here to bid on my home and what ever I was selling. ALL A LIE.

    I was responsible for all these strangers, if one tripped, or the picasso fell over and was ripped, or a vase broken, even due to their neg. I was still responsible it was my home.
    [Auctioneer] had was very smart indeed.
    Who were these unprofessional people?

    I called my son, he was out of town, and I asked him to come home. I had been had, big time, scamed.

    The worst part maybe a hand full at the most came by just to bid, but only one stayed. They would leave because no one gave them the time of the day, and no one told them what time my home was being auctioned for.
    I would catch them out side but it was to late.
    I just wanted everyone to leave my home.

    Most professional set up shop in hotels etc to show their ART. Professional looking, plenty of room, airconditoned, and cost less then a tent. EASles for the expensive art with the proper lighting. It did not match. The day before one of his employees mentioned there were items coming to my home. I asked how many. Not many. Truck loads were never in any contract nor ever mentioned.

    Yes this man does commercial auctions- it keeps him in good face and looking legit.

    He’s smart. 5000-100,000k ideal – up front advertising- he gets his own photos of his own art on the homeowners ads free on brochures, list all his items in the media all at the homeowners expense. Tells you what the ads should be titled as to set himself up.
    [Auctioneer] never divest the truth until it’s to late, if he has to. The home owner pays for his dealers, employees, travel expenses, etc, & any transportation of his ART, and warehouses if he has them in their cities and the owner suspects nothings wrong. Their paying for a great deal. NOT!
    He makes 15% premium on top of each items sold buy his dealers plus the 10% sell of ur house which he slips in between his PRIVATE PERSONAL ART AUCTION in THIS STRANGERS HOME WHOM THEY WILL NEVER SEE AGAIN, while all along he had u totally fooled, he’s unethical. Loyal intentions are just to sell his ART as he told me at my auction
    screwing up your day and perhaps ur life.

    Employees make all the calls letting art buyers know what state and what house the next Art auctions at.

    HAlf of the time no one answers the phones, nor the agent
    until it’s crunch time. WA LA.

    CONTRACTS:

    These contracts ARE NOT the official Real Estate Contracts which are used. There are no INITIALS where they are necessary on my contract.
    NO WITNESS signed this contract where it states WITNESS________________________________.

    [The Auctioneer] printed things on the bottom of this contract
    not in my presence after I signed it, and I NEVER INITIALED THEM SHOWING I AGREED AND APPROVED.
    Only got the yellow copy. I never even looked at it as it was folded up. I was suppose to trust this man! NOT!
    Don’t initials have to be present on the contracts where initials are needed to be legal a legal Real Estate Contract ?

    seller/agent contract was only an exclusive listing agreement, not an absolute. There was small writing saying he had the power of attorney. Thus when it came to myself and the buyer [the auctioneer] excluded me totally from the conversation which was none. [The Auctioneer] claimed he had full athority, I had none. He could sell it for what ever he wanted and I had no claim?
    It was a total disaster one after another.
    My home was sold out from under me under what the seller/agent contract said. 15k under. I tried to stop it. He intimidated me in front of people telling me he got what I wanted for it plus he was giving me 1/2 of his commission to me so leave him alone, This was a lie. [The Auctioneer] refused to let me see that on the contract he was writing up between the seller/buyer. he hid it from me. I told the bidder there was no deal, it was under bid. I offered him counter offer. The bidder had a blank look in his eyes like he had no clue what was going on that he was just there to pick up the contract, nor did he act like he understood any English. [The Auctioneer] Got up and left with that man. He went to his car with that man to do the deal alone.
    I never saw the contract until it was emailed a few days later to me.
    [The Auctioneer] signed as the witness and as the seller, no initials were added.

    Is this legal?

    When I spoke with the bidder over the phone he seemed to understand english rather well. I’m still not sure if the signer is the same man as the one I spoke to on the phone unless I see him in person.

    seller/buyer contract does not stipulate on it the 10% commission on the the price of the contract could be added
    so the total price shown would show above the seller/agent contract.
    Is this legal? What can I do?

    The original bid price will not cover my mortages?
    Is this legal?

    After this man under sold my home out from under me and one of his people was rude to me I had had it so I told his people to pack everything and please leave my home right away, now. There were still people trying to buy their art but I told them it was over, no more buying art, to please leave my home immediately.
    His art dealers gave me dirty looks, like who the heck was I to stop their ART AUCTION and shut them down in my own home. One of the women who was at the table by the door was also rude to me.
    It was nuts.
    It was a horrible, over whelming experience, my AUCTION WAS ruined & so was 4th of JULY!

    When I asked [the auctioneer] before the auction if he had any people who contiplating offers [The Auctioneer] made no comments. His interests were not to get someone to make an offer prior to the auction because it would ruin his change to make his own intentions possible.

    People who came to the open houses and signed in were never called back with curtesy calls & told what time the home was being auctioned.

    My experience with this Auction Company they are very unethical, & unprofessional people and invaded my privacy and my home for alterative intentions other than what I hired them for. I believe heavy reprocussions should be considered and taken with this man & his company before other victims like my self get taken the way I did.

    Any assistance is greatly appreciated. I’m running out of time as I am suppose to meet with this man and the attorney about to make decisions Wednesday.

    Thank u again, for listening to my comments and providing your professional advice.

  4. Auction Law says:

    It certainly sounds like this is one of the unethical ones, not to mention the potential for illegal activities with respect to a myriad of laws.

    I looked at his website and he had two auctions around July 4th. One in California and one in Florida. In California, there is no state licensing required, so there is no state regulatory dept to oversee auctioneers, so your primary recourse is taking him to court, although there may be other criminal statutes that could be filed with the state district attorney. If it was in Florida, I would recommend contacting the state’s regulatory dept about the problems you incurred and filing a complaint against the auctioneer. http://www.myflorida.com/dbpr/pro/auct/index.html

    If was in Florida, the Florida regulatory dept will get him to answer for his activities and they will rule on whether he acted illegally or not and may lead to additional charges filed against him, if they find the need to pursue it. But, this may not settle your problem completely, by any means. Especially if they don’t find negligence on his part.

    You indicated that you are meeting with a lawyer. That is the next best choice, and you should have no problem stopping any further activities towards the sale of your home. It is unlikely that the auctioneer has the full authority to close on the sale of the house and your personal signature will most likely be required before the transfer of any real estate will be accepted. However, let the lawyer verify this and then your next step would be to file suit against the auctioneer for not fulfilling his obligations.

    Unfortunately, there are a few bad apples in any profession, that can give others a negative view of all. These need to be dealt with, quickly and severely, to limit the damage they can do to others, not to mention the auction industry’s reputation, itself.

    Keep in mind, if you are signing a contract, you should be sure you understand the terms and ask plenty of questions. If you aren’t sure about the explanations, by all means, have it reviewed by an attorney before signing.

    Sorry for your bad experience, with someone of questionable morals. I hope that you will keep us informed of the events of your future actions, as this is a good lesson for others to learn from, although it’s a shame that you have to bear the burden of the tribulations, yet to come.

    Please, let us know how it progresses and the outcome of the events.

  5. ulisaja kabissa says:

    thanks for the materials they are real good,but i advice you to add some more or you may add let sy decided cases on the law of public auctioneer unless other wise you guys are doing a very good job.

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