Summary
holding plaintiff stated claim for breach of duty to conduct a fair auction where defendants promised to "promptly execute and deliver a definite purchase agreement" upon acceptance of an offer, but instead rescinded "acceptance of plaintiff's offer in favor of a higher offer allegedly submitted after the deadline for submitted offers" had passed
Summary of this case from Wells Fargo Bank, N.A. v. HoldCo Asset Mgmt., L.P.Opinion
June 5, 1997
Appeal from the Supreme Court, New York County (Herman Cahn, J.).
The documents prepared by defendants setting forth the terms of the bidding for the sale of defendant Atkinson's subsidiary provided that, upon acceptance of an offer, Atkinson and the purchaser "will promptly execute and deliver a definite purchase agreement". That undertaking is clearly inconsistent with defendants' rescission of their acceptance of plaintiffs offer in favor of a higher offer allegedly submitted after the deadline for submitting offers. Although the bidding documents reserved Atkinson's right to accept or reject any offer in its absolute discretion, there was no express reservation of a right to rescind an acceptance. Accordingly, plaintiffs' first cause of action for breach of contract is viable, and we modify to reinstate it. Also viable are plaintiffs' causes of action for breach of the duty to hold a fair auction and unjust enrichment. Concerning the former, while ordinarily an auction entails a "public sale of property to the highest bidder, conducted by receiving, competitive oral bids" (7 N.Y. Jur 2d, Auctions and Auctioneers, § 1), once the parties agreed to a private auction to selected potential purchasers who submitted written bids, the auction had to be conducted fairly pursuant to its terms. Concerning the latter, it is sufficient, as plaintiffs allege, that defendants induced them into spending approximately $300,000 investigating and evaluating the subsidiary, and then unfairly used plaintiffs' offer as a "foil" to get a higher offer after plaintiffs' offer had been accepted.
Concur — Sullivan, J.P., Milonas, Nardelli, Williams and Mazzarelli, JJ.