Gray•Duffy, LLP successfully wins case dismissal in pawn shop contract case. (Bravo)

June 2016

Isidro Bravo v. Kings Pawn Shop

Overview

David Fisher of Gray Duffy’s Encino, Ca office represented Kings Pawn Shop dba Kings Jewelry & Loan in an action filed by Isidro Bravo in the Los Angeles Superior Court in which Mr. Bravo sought damages in excess of $600,000 arising out of 19 separate loan contracts. We successfully demurred to the Plaintiff’s complaint but the Court gave plaintiff leave to amend. After filing a demurrer to the first amended complaint, the Court indicated at a Case Management Conference that it intended to dismiss the case at the next hearing on the demurrer. Following that CMC, the plaintiff dismissed his case with prejudice.

Discussion

Plaintiff Isidro Bravo sued Kings for Breach of Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing, to Restrain Unlawful Disposition of Collateral and to Enforce Right of Redemption, Forfeiture of Principal and Interest for Violation of Financial Code, Conversion, Accounting, Temporary Restraining Order and Preliminary Injunction, and Declaratory Relief. Plaintiff was a complete stranger to the underlying contractual relationship between Kings and its customer/borrower, “MP”, who borrowed money from Kings using jewelry she owned to collateralize her loans. Kings has never loaned any money to Plaintiff. MP filed for bankruptcy. Kings alleged the bankruptcy filing was in order to defraud the bankruptcy court and her creditors. MP “assigned” her loans to “JP” without Kings’consent. JP in turn “assigned’ the loans to Plaintiff. MP never disclosed the assignments to the bankruptcy court, and thus did not include her jewelry in the bankruptcy estate, which Kings alleged defrauded her creditors. According to Plaintiff’s complaint, Plaintiff was the assignee of jewelry and loan contracts that MP pawned with Defendant . MP borrowed approximately $157,991.00 from Kings using gold rings, watches, necklaces and bracelets as collateral for the loans. Plaintiff claimed that the 19 loan contracts contained “unfair and overbearing provisions” including a provision that prohibited the borrower from assigning the loan contracts to anyone. As a result of Kings’ alleged refusal to release the collateral to Plaintiff, Plaintiff claimed he had been damaged in the amount of $631,964 – an amount Plaintiff claimed to be the fair market value of the collateral. As a general statement, anti-assignment in contracts are not always enforceable. A court will generally disregard an anti-assignment clause unless an overriding reason exists to enforce the provision. One such reason is when the performance of the contract is personal in nature, such as an agreement to provide personal services like singing or entertainment. In this case, Gray Duffy successfully argued that pawn contracts are unique and special and an anti-assignment provision is consistent with the policy of Ca. Fin. Code §21201 which requires that “Every loan made by a pawnbroker for which goods are received in pledge as security shall be evidenced by a written contract, a copy of which shall be furnished to the borrower.” In addition, a pawnbroker must obtain and report the proper identification of the borrower, including his name, driver’s license or other State or Federal issued form of identification, and a thumb print. The legislative intent behind the requirement to obtain personal identifying information of the borrower is codified in Ca. Bus. & Prof., Code §21625: It is the intent of the Legislature in enacting this article to curtail the dissemination of stolen property and to facilitate the recovery of stolen property by means of a uniform, statewide, state-administered program of regulation of persons whose principal business is the buying, selling, trading, auctioning, or taking in pawn of tangible personal property and to aid the State Board of Equalization to detect possible sales tax evasion. Further, it is the intent of the Legislature in enacting this article to require the uniform statewide reporting of tangible personal property acquired by persons whose principal business is the buying, selling, trading, auctioning, or taking in pawn of tangible personal property, unless the property or the transaction is specifically exempt herein, for the purpose of correlating these reports with other reports of city, county, and city and county law enforcement agencies and further utilizing the services of the Department of Justice to aid in tracing and recovering stolen property. Ca. Bus. & Prof. Code §21628 requires a pawnbroker to transmit to the Chief of Police, on a daily basis, the name of the borrower, a passport number, driver’s license number or other State-issued form of identification, and a legible thumb print, amongst other things. Gray Duffy successfully argued that these requirements evidence the legislative intent that contracts between a pawnbroker and its borrowers are personal. Otherwise, borrowers could freely assign their contracts and easily avoid the legislative intent to curtail the dissemination of, and to aid in the tracing and recovery of stolen property.

Please Note: This article is necessarily general in nature and is not a substitute for legal advice with respect to any particular case. Readers should consult with an attorney before taking any action affecting their interests.