Tuesday - 16 September 2014

Sellers retain the right to anonymity, rules New York Appeals Court

06 January 2014Written by Roland Arkell

The New York Court of Appeals has overturned a decision that could have forced the state’s auctioneers to make public the names of their consignors.

In September 2012 the Supreme Court rejected the claim that New York's auctioneers follow common practice when preserving the anonymity of their clients and said that a binding auction contract in the state must include the name of both buyer and seller.

The surprise ruling had followed a legal action brought by Chester, New York saleroom William J. Jenack against a buyer who declined to pay his bill. Lawyers for Albert Rabizadeh, a Long Island-based dealer in Russian works of art, argued that the auction house had lacked the proper documents to demand payment of $400,000 ($460,000 including premium) for a silver and enamel box by Ivan Petrovich Khlebnikov he won with a telephone bid in 2008.

Rabizadeh's argument was based on the letter of the General Obligations Law, the statute covering contracts between buyers and sellers in New York, which says a legally recognised contract must include the names of both parties. A panel of four judges had agreed that a simple consignment number used by Jenack on his paperwork was not enough.

Split Opinion

Legal opinion has been split on the ruling and its implications for New York auctioneers. "As of now you can back out of any transaction where the name of the seller is not provided," said Peter Stern of Manhattan art lawyers McLaughlin & Stern.

Others, such as Jonathan Olsoff of Sotheby's, had argued that the significance of the ruling had been overstated as it related only to cases when a purchaser defaulted. Nevertheless Sotheby's were among those to submit a 'friend of the court' brief urging the Court of Appeals to rule in favour of Jenack.

In a review of the case, the New York Court of Appeals, the state's highest court, decided unanimously that the Supreme Court had erred in its judgment. It ruled that the information provided by the auctioneer's clerking sheet (a headed document listing items offered for sale and number assigned by Jenack to the consignor) and an absentee bidding form was sufficient for the sale agreement to stand, even without the seller's name.

Judge Jenny Rivera wrote in her ruling of December 17 that the General Obligations Law did not require the name of the seller but "the name of the person on whose account the sale is made". Accordingly, it was enough for the auctioneer to be named on documentation as the seller's agent.

Referencing a historic ruling that the statute "was not enacted to afford persons a means of evading just obligation; nor interpose the statute as a bar to a contract fairly made", Judge Rivera had sharp words for Rabizadeh.

"Using the statute as a means of evading a just obligation is precisely what Rabizadeh attempts to do here, but the law and the facts foreclose him from doing so. Rabizadeh took affirmative steps to participate in Jenack's auction, including executing an absentee bidder form with the required personal information. He then successfully won the bidding… closing out other interested bidders, with his $400,000 bid. He cannot seek to avoid the consequences of his actions by ignoring the existence of a documentary trail leading to him."

Anonymity is often prized in auction transactions. Jenack and other auctioneers argued that their business is important to New York and would be undermined without the "time-honored and necessary custom and practice" of keeping sellers' names confidential.

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