National Pawn Brokers Unlimited v. Osterman, Inc.

• Decision Date: 22 April 1993
• Docket Number: No. 91-2666,91-2666
• Citation: 500 N.W.2d 407,176 Wis.2d 418
• Parties: , 21 UCC Rep.Serv.2d 1176 In the Matter of the Return of Property in State v. Donald L. Pippin, Jr. NATIONAL PAWN BROKERS UNLIMITED, and Hull Loan Systems, Appellants, v. OSTERMAN, INC., Respondent.
• Court: Wisconsin Court of Appeals

Page 407

500 N.W.2d 407

176 Wis.2d 418, 21 UCC Rep.Serv.2d 1176

In the Matter of the Return of Property in State v. Donald L. Pippin, Jr NATIONAL PAWN BROKERS UNLIMITED, and Hull Loan Systems, Appellants, v. OSTERMAN, INC., Respondent.

No. 91-2666.

Court of Appeals of Wisconsin.

Submitted on Briefs May 8, 1992.

Opinion Released April 22, 1993.

Opinion Filed April 22, 1993.

Before EICH, C.J., GARTZKE, P.J., and DYKMAN, J.

GARTZKE, Presiding Judge.

National Pawn Brokers and Hull Loan Systems ("pawnbrokers") appeal from a circuit court order returning jewelry to Osterman, Inc. The jewelry was evidence in a trial on criminal charges against Donald Pippin. He had obtained it from Osterman, a retail jeweler in Madison, Wisconsin, by paying with a bad check and then pawned it to appellants in Minnesota. ¹ Both sides claim a security interest in the jewelry. We hold that the pawnbrokers' security interests are prior to Osterman's. We reverse.

The issues are: (1) whether the Wisconsin circuit court had jurisdiction to determine who is entitled to possession of the jewelry; (2) whether Pippin had rights in the jewelry to which the pawnbrokers' security interests could attach, even though Osterman had reserved title to the jewelry and had prohibited its transfer until the purchase price was fully paid; (3) if the pawnbrokers acquired security interests in the jewelry and perfected their interests by possession, whether that perfection continued after the police seized the jewelry pursuant to a search warrant; and (4) if the pawnbrokers' security interests did not attach or were no longer perfected when Osterman perfected its interest, whether Osterman is estopped from asserting that its interest is superior to the claims of the pawnbrokers.

We conclude that the circuit court had jurisdiction, Pippin had rights in the jewelry to which the pawnbrokers' security interests could attach, their interests were perfected by possession and perfection continued after seizure. Because their security interests were perfected before Osterman's, the pawnbrokers' security interests have priority over Osterman's. The jewelry should be returned to the pawnbrokers. We do not reach the question of whether Osterman is estopped from asserting the priority of its security interest.

I. FACTS

The pertinent facts are undisputed. On November 24, 1990, Pippin purchased the jewelry from Osterman in Madison. The purchase price was $39,750.38. Pippin signed three documents in connection with the sale. The first was a credit application. It provides personal information regarding Pippin, including his Menomonie, Wisconsin address and describes the jewelry. The second was a sales agreement. It describes the items sold, the purchase price, the amount paid by check and the balance payable under a "Super Charge" agreement. It provides,

The balance due on this purchase is payable in installments under my credit plan contract and security agreement which is incorporated herein by reference. I agree that seller shall retain ownership of the items so purchased until entire balance is fully paid....

The third was a "Super Charge Retail Charge Agreement," by which Pippin agreed that in consideration of the sale,

A security interest in each item of goods purchased hereunder and the proceeds thereof shall remain with Seller until the unpaid balance directly relating to each such item of goods purchased is fully paid. Buyer will not dispose of the goods ... or encumber them without written consent of Seller ... until Buyer has fully paid for them.

Pippin paid Osterman $30,000 by check, and agreed to pay the balance in installments. The check was drawn on a closed account. On November 27, 1990, he pawned some of the jewelry to National in Bloomington, Minnesota, for a $6,995 loan and on November 30, 1990, he pawned the remaining items to Hull in Minneapolis for a $2,076.04 loan. He signed a promissory note and security agreement with Hull. No written security agreement with National is of record.

On December 6, 1990, a criminal complaint issued in Dane County, Wisconsin, charging Pippin with violating sec. 943.24(2), Stats. (1989-90), issuing a check payable for more than $500, intending it not be paid. ² Having learned that Pippin had pawned the jewelry, the Madison police requested the Minnesota police to obtain a search warrant directed to the pawnbrokers' businesses. The Minnesota police did so, and on December 11, 1990, they seized the jewelry from the pawnbrokers and turned it over to the Madison police the next day. On December 13, 1990, the Madison police delivered the jewelry to Osterman but retook it the next day for use as evidence at the criminal trial. Pippin was convicted.

On December 26, 1990, the pawnbrokers petitioned the Dane County Circuit Court for Dane County, Wisconsin, for return of the jewelry. On February 12, 1991, Osterman also petitioned for its return and, on February 14, filed a financing statement in the office of the Wisconsin Secretary of State and in the offices of the Dane and Dunn County Registers of Deeds. ³ On July 25, 1991, the pawnbrokers petitioned the Minnesota court which issued the search warrant for return of the jewelry to that court. On August 13, 1991, the Dane County Circuit Court entered the order before us on appeal, and on October 22, 1991, the Minnesota court denied the pawnbrokers' petition to it because they had chosen to litigate the matter in Wisconsin.

II. JURISDICTION

Although the pawnbrokers petitioned the Dane County Circuit Court for return of the jewelry under sec. 968.20, Stats., they argue first that the Minnesota court which issued the warrant should decide the matter and second that the Dane County Circuit Court lacked subject-matter jurisdiction under that statute. ⁴ They contend that only the court for the county where the property was seized or to which the warrant was returned has jurisdiction to hear a sec. 968.20 motion. Since the Dane County Circuit Court fits neither category, the pawnbrokers conclude the court lacked subject-matter jurisdiction to hear their petition. We reject their contentions.

Because the Minnesota court declined to decide the matter on grounds that the pawnbrokers chose Wisconsin as their forum, and we conclude that the Dane County Circuit Court had both subject-matter and personal jurisdiction, we decline to pursue the pawnbrokers' claim that this case belongs in Minnesota.

We agree that sec. 968.20(1), Stats., has no application to the pawnbrokers' petition in the Dane County Circuit Court. The statute applies when a petition is made to the circuit court for the county in which the property was seized or to the circuit court to which return was made of the warrant authorizing seizure. Neither of those factual circumstances occurred. But that does not deprive the circuit court of subject-matter jurisdiction.

In this state, subject-matter jurisdiction is vested in the circuit court by the constitution of this state, and "[n]o circuit court is without subject matter jurisdiction to entertain actions of any nature whatsoever." Mueller v. Brunn, 105 Wis.2d 171, 176, 313 N.W.2d 790, 792 (1982). However, if a statute prevents the court from exercising that jurisdiction, it lacks competency to proceed. Id. at 176-78, 313 N.W.2d at 792-93.

Although sec. 968.20(1), Stats., has no application to the pawnbrokers' petition, the circuit court was competent to proceed. Nothing in sec. 968.20(1) reflects an intention that the circuit court is competent to order return of seized property only if the circumstances described in the statute have occurred. When, as here, no statute applies, and no statute prevents a circuit court having personal jurisdiction over the parties from adjudicating the matter before it, the court may proceed under its constitutional authority. No question having been raised regarding personal jurisdiction, we conclude that the Dane County Circuit Court was competent to determine the interests of the parties in the jewelry.

III. PAWNBROKERS' SECURITY INTERESTS ATTACHED TO THE JEWELRY

A security interest "is not enforceable against the debtor or third parties with respect to the collateral and does not attach" unless the debtor signed a security agreement containing a description of the collateral or the collateral is in the possession of the secured party pursuant to agreement, value was given, and "the debtor has rights in the collateral." ⁵ U.C.C. § 9- 203(1), sec. 409.203(1), Wis.Stats., and MINN.STAT. § 336.9-203(1). ⁶

Osterman asserts that the third requirement--the debtor has rights in the collateral--has not been met for the pawnbrokers' security interests to attach to the collateral. Osterman relies on the sales agreement which provides that Osterman retains ownership of the jewelry until the purchase price is fully paid, and on its security agreement which prohibits Pippin from disposing of the jewelry without Osterman's consent.

Article 9 of the Uniform Commercial Code does not define "rights in the collateral." Because Osterman's transaction with Pippin was a sale, Article 2 determines whether he had such rights. 8 R. ANDERSON, UNIFORM COMMERCIAL CODE, sec. 9-203:44, at 688 (1985) (footnote omitted).

Osterman's sales agreement and security agreement do not affect Pippin's rights in the collateral. The debtor's "rights" in the collateral do not depend on whether the debtor has title to it. "Each provision of this Article with regard to ... rights ... applies irrespective of title to the goods...." U.C.C. § 2-401, sec. 402.401, Wis.Stats., and MINN.STAT. § 336.2-401; see also U.C.C. § 9-202, sec. 409.202, Wis.Stats., and MINN.STAT. § 336.9-202.

Article 2 converts Osterman's retention of title into a security interest. "Any retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest." U.C.C. § 2-401(1), sec....