IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
July 9, 2003 Session
BOBBY CUNNINGHAM v. TERRY LESTER, ET AL.
Direct Appeal from the Chancery Court for Bedford County
No. 23,125 J. B. Cox, Chancellor
No. M2002-00887-COA-R3-CV - Filed August 20, 2003
This dispute arises from an auction sale of real property. The trial court awarded plaintiff buyer
specific performance of one contract and denied specific performance of a second contract. We
affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed; and
Remanded
DAVID R. FARMER , J., delivered the opinion of the court, in which ALAN E. HIGHERS, J. and HOLLY
M. KIRBY, J., joined.
John H. Norton, III, for the appellant, Bobby Cunningham.
Ralph McBride, Jr., for the appellees, Terry Lester and wife, Gayla Lester.
OPINION
The facts relevant to this appeal are not in dispute. Terry Lester (Mr. Lester) and Gayla
Lester (Mrs. Lester; collectively, “Lesters”) owned real property in Bedford County as tenants by
the entirety. In February 2000, Lesters executed a contract with Bob Parks Auction Company
(“BPAC”) for sale by auction of several parcels of land. Pursuant to the contract, an auction was
scheduled for April 2000, and an advertising brochure was published and disseminated. The
auction was conducted as scheduled. Prior to the commencement of bidding, John Higgins (Mr.
Higgins), the principal auctioneer, announced that the land was offered “with reserve,” with
confirmation of the final bids to be made by Lesters. Lesters were present at the auction. This
dispute concerns tracts three, four and five of the auctioned land.
Appellant, Bobby Cunningham (Mr. Cunningham) was the successful bidder at auction
on tracts four and five of the property. A contract for sale of these tracts was executed and
signed by Mr. Cunningham, Mr. Lester, and Mr. Higgins on behalf of BPAC. Mr. Cunningham
also entered into an agreement with Keith Neal (Mr. Neal), the highest bidder on tract three, by
which Mr. Cunningham took over Mr. Neal’s bid. A contract for sale of tract three was signed
by Mr. Cunningham and Mr. Lester, but not by Mrs. Lester or Mr. Higgins. As required by the
contracts for sale, Mr. Cunningham paid earnest money of $11,602.27, ten percent of the sale
price, to Mr. Higgins. The contracts anticipated a closing date of thirty days from the date of
auction.
Prior to the date of closing, Mr. Higgins informed Mr. Cunningham that Lesters would
not close on the sale. Mr. Cunningham filed a complaint for specific performance and restraining
order on May 25, 2000, asserting that he was ready and able to close on the property. Lesters
raised the statute of frauds as an affirmative defense, contending that the contracts were
unenforceable as they had not been signed by Mrs. Lester. The trial court awarded specific
performance on the contract for sale of tracts four and five, which had been signed by Mr. Lester
and Mr. Higgins as an agent for Mrs. Lester. The trial court denied specific performance of the
contract for sale of tract three, which had not been signed by Mrs. Lester or her agent. Mr.
Cunningham now appeals this determination.
Issue Presented
As we perceive it, the issue presented for review by this Court is whether, under the
statute of frauds applicable to contracts for sale of real property, the trial court erred by denying
specific performance of the contract for sale of tract three.
Standard of Review
The issue before this Court is an issue of law. Our review of issues of law is de novo,
with no presumption of correctness attached to the determinations of the trial court. Bowden v.
Ward, 27 S.W.3d 913, 916 (Tenn.2000).
Analysis
We begin our analysis with the proposition that auction sales of real property are within
the provisions of the statute of frauds. 7 Am. Jur. 2d Auctions and Auctioneers § 37 (1997); see,
e.g., Johnson v. Hayes, 532 S.W.2d 561 (Tenn. Ct. App. 1975)(perm. app. denied). Thus
contracts for the sale of land by auction are not enforceable absent a signed writing
memorializing the sale. Id. An auctioneer may sign a contract for the sale of land when
authorized by the owner. Id. §§ 39-40. Where the owner reserves the right to refuse a bid and
the auctioneer has stated that the sale is subject to confirmation by the owner, there is no binding
sale until the owner accepts the bid. See, e.g., Moore v Berry, 288 S.W.2d 465 (Tenn. Ct. App.
1955)(perm. app. denied). The statute of frauds provides, in pertinent part,
[n]o action shall be brought ... [u]pon any contract for the sale of lands,
tenements, or hereditaments, or the making of any lease thereof for a longer term
than one (1) year ... unless the promise or agreement, upon which such action
shall be brought, or some memorandum or note thereof, shall be in writing, and
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signed by the party to be charged therewith, or some other person lawfully
authorized by such party.”
Tenn. Code Ann. § 29-2-101(a)(2000).
The purpose of the statute is to protect against unconsidered agreements regarding the
sale of real property. Johnson v. Haynes, 532 S.W.2d at 565. The requirement that such
agreements be in writing and signed by the person to be charged seeks to avoid
misunderstandings about their terms and nature. Id. Historically, the courts of this State have
held that, although form is immaterial, to be enforceable under the statute of frauds a signed
writing must express the essential terms of the agreement with a degree of certainty such that the
agreement of the parties can be determined without recourse to parol evidence. See, e.g., Hudson
v. King, 49 Tenn. 560 (Tenn. 1870); Johnson v. Haynes, 532 S.W.2d at 565.
Mr. Cunningham contends that the trial court erred by distinguishing between the contract
for the sale of tracts four and five (“Contract A”) and the contract for the sale of tract three
(“Contract B”) “merely” because Contract A was signed by Mr.Lester and Mr. Higgins, as agent
for Mrs. Lester, while Contract B was not signed by Mrs. Lester or her agent. He further asserts
that the contract between Lesters and BPAC, which was signed by Mr. Lester and Mrs. Lester, is
sufficient to satisfy the statute of frauds. Finally, Mr. Cunningham submits that Mrs. Lester
orally acknowledged the sale of tract three, and that her refusal to sell is not an exercise of her
right to reserve but an attempt to rescind the contract.
We first address Mr. Cunningham’s assertion that Contract A is not distinguishable from
Contract B “merely” because Contract A was signed by Mrs. Lester’s agent, while Contract B
was not. Mr. Cunningham cites Johnson v. Hayes for the proposition that the sale was complete
upon the “fall of the hammer.” In Johnson, this Court held that an auction sale of land was valid
and complete at the fall of the hammer where 1) there was a valid contract between the owner
and the auction company; 2) the auctioneer did not announce the owner’s right to reserve,
owner’s right to reserve was not in the printed advertising material, owner was present at the
auction and knew her right to reserve had not been announced; and 3) the description of the land
in the auctioneer’s contract, together with that in the printed posters, was sufficient to satisfy the
statute of frauds. Johnson v. Haynes, 532 S.W.2d 561, 564-66 (Tenn. Ct. App. 1975). We also
noted that an auctioneer is basically an agent of the owner, and that when a right to reject is not
announced at the auction or stated in the printed materials it cannot be asserted after the bid is
accepted. Id. at 565. In the case now before us, it is precisely because Mr. Higgins, the
auctioneer, signed the contract as an agent of Mrs. Lester that Contract A is enforceable.1
Contract A is a signed contract for the sale of land which, together with the description of
property contained in the advertising materials and the signed contract between Lesters and
BPAC, satisfies the statute of frauds. The validity of Contract A, moreover, has not been raised
as an issue on appeal.
1
Neither party has raised the issue of whether Mr. Higgins had authority to execute the contra ct as M rs. Lester’s
agent. We accordingly do not address it here.
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Contract B, on the other hand, was signed neither by Mrs. Lester nor her agent, Mr.
Higgins. Thus we next consider Mr. Cunningham’s assertion that, under Johnson v. Haynes, the
contract for sale at auction between BPAC and the Lesters is sufficient to satisfy the statute of
frauds. We again observe that in Johnson there was neither announcement nor notice that owner
reserved the right of refusal and bids were subject to confirmation by owner. Id. at 563. The
Johnson Court accordingly treated the auction as one without reserve. Thus the auctioneer in
Johnson, acting as an agent for the owner, accepted the highest bid when the hammer fell. Id. at
564. Having determined a contract for sale existed, the Johnson Court next considered whether
the contract was enforceable under the statute of frauds. Id. at 565. The court determined that
the signed contract between the seller and the auctioneer, the posters advertising the sale, and the
bid sheet kept by the auctioneer together constituted a writing sufficient to satisfy the statute of
frauds. Id. at 566.
The record before us includes a signed contract between Lesters and BPAC to sell at
auction Lesters’ real and personal property. It also contains an advertising brochure describing
the real property to be sold. However, Mr. Higgins announced at the auction that the property
was offered with reserve, and that bids would be subject to confirmation by Lesters. Thus Mr.
Cunningham’s bid was an offer to purchase subject to Lesters’ confirmation or refusal. See
Moore v. Berry, 288 S.W.2d 465, 468 (Tenn. Ct. App. 1955). In Moore v. Berry, this Court
noted that where the right to reject has been reserved, to hold that the fall of the hammer
constitutes a final sale absent confirmation by the owner would render the announced conditions
of the auction meaningless. Id. at 468. The conditions of a sale at auction which are announced
at the auction are binding on the bidder. Id. Accordingly, in the present case, there was no
acceptance of Mr. Cunningham’s bid until it was confirmed by Mr. Lester and Mrs. Lester, or
their agent. Mr. Cunningham contends that Mrs. Lester orally accepted his offer, and that her
refusal amounts to an effort to rescind the contract. This argument must fail under the statute of
frauds. As Mr. Cunningham asserts, the statute of frauds may be satisfied by a group of writings
which, although not all signed by the person to be charged, together express with certainty the
essential terms of the contract. See, e.g., Johnson v. Haynes, 532 S.W.2d at 565. However, the
court must be able to determine these essential elements without resort to parol evidence. Id.
The writings in evidence in this case, the signed contract between Lesters and BPAC and the
advertising brochure describing the property and announcing the auction, reflect no agreement by
Mrs. Lester to confirm Mr. Cunningham’s bid. We cannot determine acceptance of Mr.
Cunningham’s offer to purchase without resort to parol evidence which, in this case, is
ambiguous at best. The contract for the sale of tract three is unenforceable under the statute of
frauds.
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In light of the foregoing, we affirm the judgment of the trial court refusing specific
performance of the contract for sale of tract three.2 Costs of this appeal are taxed to the
appellant, Bobby Cunningham, and his surety, for which execution may issue if necessary.
___________________________________
DAVID R. FARMER, JUDGE
2
Lesters raise the additional issue of whether the sale of tract 3 should be barred by the doctrine of un clean
hands. In light of our holding in this opinion, it is unnecessary to address this issue.
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