Be Sure You Can Pay When Bidding for Wine and Beer Equipment at Auction

It’s pretty common to get extra winemaking and brewing equipment through an auction of an estate or bankruptcy court’s sale of the assets of a debtor.  Keeping an eye on regional auctions and announcements can be a lucrative method for obtaining some pretty nice equipment or even land at a reduced price.

In Tarbox v. Devalmont Vineyards – Gruet Winery and Laurent L. Gruet, a recent  adversary proceeding in a Northern District of Texas bankruptcy matter, a court was faced with a determination about dealing with an auction gone bad.

A bidder has shown up at the auction, bid $6.5 million for the estate and land of Caprock Wine Company ($0.25 million more than the next highest bidder at the time) and allegedly made some statements to the press along the lines of:

“26. When asked by reporters after the Auction if he would have bid higher, Laurent remarked that he would have bid at least $10 million because he “does not like to lose.”

The bidder signed a contract right after the sale that had the following provision:

“[If Buyer breaches] Seller may, at Seller’s option, either a) unilaterally cancel and terminate Buyer’s right to purchase the property, including all legal and equitable interest, if any, Buyer may have regarding the Property and retain all sums previously paid on the Purchase Price as liquidating damages, or b) elect to recover from Buyer the actual damages incurred by Seller, including loss of the balance of the Purchase Price, costs of resale, attorney’s fees, and such other incidental damages.”

After that, the bidder/buyer was supposed to come up with $650,000 for the deposit and failed to do so.  The trustee in the bankruptcy who was responsible for the auction sued the bidder for breaching the contract and held a second auction.

Oddly, the second auction’s bids were nowhere near the $6.5 and $6.25 million that were bid at the first auction.  The highest of the sealed bids at the second auction was $2.5 million followed by a second highest bid of $800,000.  There were some contracts and supply agreements with local grape growers that any potential winner was supposed to accept as part of the bid package which probably weren’t available by the time of the second auction.

The difference in the price between the second auction and the first – i.e. what the seller got and what it should have gotten if the first bidder had followed the contract – was $4 million.  Which is what the court awarded in damages against the individual defendant that had showed up at the auction and bid.

A full copy of the amended complaint with all the bid information and contracts can be found here.  The Court’s opinion and findings of fact – which tell a long story about the history of this case – can be found here.