BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
SB 762(Hill)
As Amended April 15, 2013
Hearing Date: April 30, 2013
Fiscal: Yes
Urgency: No
TW
SUBJECT
Secondhand Goods: Lost, Stolen, or Embezzled Items
DESCRIPTION
This bill would clarify the rights and interests of licensed
pawnbrokers and secondhand dealers in property seized from a
pawnbroker where a criminal investigation or case involving the
property has been resolved or terminated. This bill would
provide additional procedures for a law enforcement agency to
seize lost, stolen, or embezzled property from a pawnbroker or
secondhand dealer, including authorizing a law enforcement
officer to seize property, with or without a warrant, if the
pawnbroker or secondhand dealer in possession of the property
refuses to place a hold on the property.
This bill would also provide that operating as an unlicensed
secondhand dealer and failing to report acquisitions of
secondhand goods may be considered criminal profiteering by
organized crime and the profits of such an enterprise subject to
criminal forfeiture.
BACKGROUND
The Legislature has enacted various laws to curtail the
dissemination of stolen property and facilitate the recovery of
stolen property, including laws regulating pawnbroker and
secondhand dealer businesses, which may be utilized by
individuals attempting to sell or pawn stolen or embezzled
property.
With the recent rise in the price of gold, individuals, who are
(more)
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unlicensed to deal in the resale of secondhand goods, are
availing themselves of this opportunity to purchase gold and
jewelry items for resale. The author argues that this
unlicensed activity must be addressed.
In order to limit the potential for criminal transfer of
property, this bill would enhance existing laws governing the
practices of unlicensed secondhand goods sales, and provide
additional due process protections to licensed pawnbrokers and
secondhand dealers.
This bill contains provisions similar to those in AB 704 (Ma,
2011), which died in the Assembly Committee on Judiciary. AB
1796 (Galgiani, 2012), would have included in the definition of
criminal profiteering activity the unlicensed sale of tangible
personal property or other secondhand goods, including gold and
other precious metals, without a license. AB 1796 failed
passage in the Assembly Committee on Public Safety.
This bill was heard by the Senate Committee on Public Safety on
April 23, 2013, and passed out on a vote of 7-0.
CHANGES TO EXISTING LAW
Existing law includes a statement of legislative intent to
curtail the dissemination of stolen property, to facilitate the
recovery of stolen property and to detect possible sales tax
evasion by means of a uniform, statewide, state-administered
program of regulation of persons whose principal business is
dealing in tangible personal property, as specified. (Bus. &
Prof. Code Sec. 21625; Fin. Code Sec. 21051.)
Existing law includes legislative intent that reports of
transactions in pawned and secondhand property should be
correlated with law enforcement reports so as to trace and
recover stolen property. (Bus. & Prof. Code Sec. 21625.)
Existing law , with respect to the dissemination of stolen
property, defines a "secondhand dealer" to mean any person or
entity whose business includes buying, selling, trading, taking
in pawn, accepting for sale on consignment or auctioning any
tangible personal property. (Bus. & Prof. Code Sec. 21625.)
Existing law defines "tangible personal property" to mean: (1)
all secondhand personal property that has a serial number or
personalized markings; (2) all tangible property, new or used,
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taken by a pawnbroker as security for a loan, and (3) all
tangible personal property commonly sold by secondhand dealers
that constitutes a significant class of stolen property. (Bus.
& Prof. Code Sec. 21627(a)-(b).) Existing law provides that
tangible personal property does not include coins, monetized
bullion, or commercial grade ingots of precious metals. (Bus. &
Prof. Code Sec. 21627(d).)
Existing law defines a "pawnbroker" to mean a person engaged in
the business of receiving goods in pledge for security for a
loan." (Fin. Code Sec. 21000.)
Existing law defines a "secondhand dealer" to mean any person,
copartnership, firm, or corporation whose business includes
buying, selling, trading, taking in pawn, accepting for sale on
consignment, accepting for auctioning, or auctioning secondhand
tangible personal property. A "secondhand dealer" does not
include a "coin dealer." (Bus. & Prof. Code Sec. 21626(a).)
Existing law defines a "coin dealer" to mean any person, firm,
partnership, or corporation whose principal business is the
buying, selling, and trading of coins, monetized bullion, or
commercial grade ingots of gold, or silver, or other precious
metals. (Bus. & Prof. Code Sec. 21626(a).)
Existing law provides that a violation of the statutes
regulating secondhand dealers and tangible personal property,
including the failure to obtain a license is a misdemeanor,
punishable with fines or imprisonment, as specified. (Bus. &
Prof. Code Sec. 21645.)
Existing law provides that a license to operate as a secondhand
dealer is subject to forfeiture and the licensee's activities
may be enjoined for a breach of specified conditions, including
that the licensee shall not be convicted of an attempt to
receive stolen property or any other offense involving stolen
property. (Bus. & Prof. Code Sec. 21642(b).)
Existing law includes a statement of legislative intent to
require the uniform statewide reporting of transactions in and
acquisitions of secondhand and pawned property by pawnbrokers
and secondhand dealers. (Bus. & Prof. Code Sec. 21625; Fin.
Code Sec. 21051.)
Existing law requires pawnbrokers and coin dealers to report
daily to law enforcement all personal property purchased, taken
in trade, or taken in pawn. (Bus. & Prof. Code Sec. 21628.)
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Existing law requires, on the date that Department of Justice
(DOJ) implements the statewide electronic reporting system for
pawned or secondhand tangible personal property, each secondhand
dealer or pawnbroker to electronically report applicable
transactions, as specified. (Bus. & Prof. Code Sec. 21628(j).)
Existing law provides that a district attorney or the Attorney
General may seek an injunction to stop or prevent a violation of
the laws governing transactions in pawned and secondhand goods.
(Bus. & Prof. Code Sec. 21646.)
Existing law provides that when a peace officer has probable
cause to believe that property, other than coins and precious
metal ingots, in the possession of a pawnbroker, secondhand
dealer or coin dealer is stolen, the officer may place a hold on
the property for up to 90 days. Existing law prohibits the
pawnbroker or dealer from releasing or disposing of the property
without a court order or written receipt from an officer of the
agency that placed the hold. Existing law also requires the
pawnbroker or dealer to produce and deliver the property to a
peace officer for purposes of a criminal investigation. (Bus. &
Prof. Code Sec. 21647(b)-(c).)
Existing law requires, if property reported as stolen is found
in the possession of a pawnbroker, secondhand dealer or coin
dealer, the law enforcement agency to provide written notice to
the person who reported the property lost or stolen the
following information:
the contact information for the pawnbroker, secondhand dealer
or coin dealer holding the property;
the law does not prohibit payment of a fee or any condition
for surrender of the property;
if the reporting person declines to participate in the
prosecution of the alleged thief, the reporting person shall
pay the broker or dealers expenses for the acquisition of the
property;
if the reporting person takes no action to recover the
property within 60 days of the mailing of notice, the broker
or dealer may treat the property as acquired in the regular
course of business; and
a copy of the notice will be mailed to the broker or dealer in
possession of the property. (Bus. & Prof. Code Sec.
21647(c).)
Existing law requires that when property subject to a law
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enforcement agency hold is no longer needed for a criminal
investigation, the law enforcement agency must release the hold.
The agency is required to give notice to the person who
reported the property as lost or stolen, as specified. (Bus. &
Prof. Code Sec. 21647(d).)
Existing law provides that if a pledgor of property (person
using the property as collateral for a loan) attempts to
retrieve the property during the holding period, the pawnbroker
is required to inform the pledgor the name of the peace officer
and law enforcement agency that placed the hold. If the
property is no longer needed for an investigation, the hold must
be released. (Bus. & Prof. Code Sec. 21647(e).)
Existing law provides that if stolen or lost property listed in
the DOJ automated property system is found in the possession of
a pawnbroker, secondhand dealer or coin dealer, and a peace
officer places a hold on the property, the following apply:
if 60 days elapses following delivery of the required notice
to the reporting person, or the hold otherwise elapses, the
pawnbroker, secondhand dealer or coin dealer may send, by
certified mail, a request to delete the property from the DOJ
automated property system;
within 30 days of the mailing of the request, the law
enforcement agency must either have the listing deleted or
place a hold on the property; and
if law enforcement takes no action within 45 days, the
pawnbroker, secondhand dealer or coin dealer may presume the
listing has been deleted and thereafter deal with the property
accordingly. (Bus. & Prof. Code Sec. 21647(f).)
Existing law requires that if allegedly stolen property has been
taken from a pawnbroker, the officer, magistrate, court clerk or
other holder of the property to deliver the property to a person
claiming ownership unless the following requirements have been
met: (1) if anyone makes a claim of ownership, the person with
custody of the property shall notify the pawnbroker; and (2) if
the pawnbroker makes no claim on the property within 10 days of
notice, the property may be disposed of in compliance with the
law. (Fin. Code Sec. 21206.8 (a)-(b).) Existing law requires
notice to be given to the pawnbroker and the property may not be
disposed of for three months. (Fin. Code Sec. 21206.8(c).)
Existing law requires, if the ownership of stolen or embezzled
property and address of the owner and security can be
ascertained, the peace officer in custody of the property to
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notify by mail the owner and security holder, as follows:
the owner shall be notified of the location of the property
and the method through which the owner may retrieve the
property;
if the property is not timely claimed, the property may be
sold, and the proceeds deposited in the county treasury, or
retained for the county if needed; and
if the property was taken from a pawnbroker or secondhand
dealer and reasonable efforts to return the property to the
owner have been unsuccessful, the property must be returned to
the pawnbroker or dealer when it is not needed in a criminal
case. (Pen. Code Sec. 1141.)
Existing law requires, if law enforcement identifies serialized
property that has been reported stolen or lost and the property
has been listed in the DOJ system, the agency shall notify the
owner or person entitled to possession of the property within 15
days. If a pawnbroker or secondhand dealer reported his or her
acquisition of the property to law enforcement, the owner must
be given the contact information of the pawnbroker or dealer and
be informed of the law concerning retrieval of property from the
business. If the property is no longer needed as evidence, it
must be returned to the owner, as specified. (Pen. Code Sec.
11108.5.)
Existing law provides that, if a defendant is convicted of a
specified offense and the defendant has engaged in a pattern of
criminal profiteering activity, criminal profiteering asset
forfeiture applies to the defendant's property, as follows: (1)
any property interest whether tangible or intangible, acquired
through a pattern of criminal profiteering activity; and (2) all
proceeds of a pattern of criminal profiteering activity,
including all things of value that may have been received in
exchange for the proceeds immediately derived from the pattern
of criminal profiteering activity. (Pen. Code Sec. 186.3.)
Existing law requires forfeited cash and proceeds of the sale of
forfeited property to be distributed as follows:
to the bona fide or innocent purchaser, conditional sales
vendor, or holder of a valid lien, mortgage, or security
interest, up to the amount of his or her interest in the
property or proceeds, as specified;
to the Department of General Services or local governmental
entity for all expenditures incurred in connection with the
sale of the forfeited property;
to the State General Fund or the general fund of the local
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governmental entity, whichever prosecutes;
in a case of fraud involving the state recycling program, to a
special fund designated in the Public Resources Code;
in the case of child pornography crimes, to the county
children's trust fund or State Children's Trust Fund; and
in a case involving the use of a minor for prostitution or
related commercial sex acts, to the Victim-Witness Assistance
Fund for child sexual exploitation and abuse counseling and
prevention programs; 50 percent of the funds shall be granted
to community-based organizations that serve minor victims of
human trafficking. (Pen. Code Sec. 186.8.)
This bill would provide that during a 90-day law enforcement
hold of lost, stolen, or embezzled property, the peace officer
may take custody of the property as evidence or leave it with
the licensed pawnbroker or secondhand dealer.
This bill would provide that if property held by a pawnbroker or
secondhand dealer is surrendered or delivered to a law
enforcement agency during the period of the law enforcement
hold, the hold and the pawnbroker's lien. Upon termination of
criminal proceedings, the property must be returned to the
pawnbroker for disposition, as specified.
This bill would require the notice, which must be provided by
law enforcement to the person who reported property as lost,
stolen, or embezzled, to be sent within two business days after
the law enforcement hold is placed on the property.
This bill would require, for property entered into the DOJ
automated property or firearm system and found in the possession
of a pawnbroker or secondhand dealer, the property to be placed
on law enforcement hold.
This bill would prohibit a pawnbroker or secondhand dealer from
refusing a request to place a hold on property that law
enforcement has probable cause to believe is stolen. If the
hold request is refused, an officer may seize the property
without a warrant.
This bill would prohibit issuance of a warrant for the search of
a pawn or secondhand business unless the application for the
warrant sets out the officer's unsuccessful attempts to use the
procedures for placing a hold on the property and the magistrate
determines that: (1) the pawnbroker or secondhand dealer has
refused to voluntarily surrender the property, or there is
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probable cause that the business owner willfully concealed the
property; and (2) any notice requirements as to the property
would frustrate the criminal investigation of the pawnbroker or
secondhand dealer.
This bill would require a civil or criminal court, in
adjudicating the competing claims of a licensed pawnbroker or
secondhand dealer and another party claiming ownership or an
interest in the property that is or was subject to a law
enforcement hold, to award possession of the property only after
due consideration is given to the effect of Commercial Code
Section 2403, which concerns the rights acquired by a purchaser
of property under various circumstances.
This bill would prohibit a peace officer, magistrate, court
clerk, or other person having custody of lost, stolen, or
embezzled property taken from a pawnbroker to deliver the
property to any person claiming ownership of the property
unless: (1) the person files a written statement, signed under
penalty of perjury, stating the factual basis upon which they
claim ownership or an interest in the property with the person
having custody of the property; and (2) the person having
custody of the property notifies the pawnbroker of the claim.
This bill would require a court, in adjudicating the competing
claims of a licensed pawnbroker or secondhand dealer and a
person claiming ownership or an interest in the property seized
from a pawnbroker, to give due consideration to the effect that
Commercial Code Section 2403.
This bill would require, at least 30 calendar days before any
hearing adjudicating any competing claims of a pawnbroker and a
person claiming ownership or an interest in the property, the
person having custody of the property to deliver to the
pawnbroker a true and correct copy of the police report
substantiating the basis of the seizure of the property from the
pawnbroker.
This bill would add to the definition of "criminal profiteering
activity" the buying, selling, trading, accepting for sale on
consignment, accepting for auctioning, or auctioning secondhand
tangible personal property, including, but not limited to, gold,
silver, platinum, palladium, and jewelry made of gold, silver,
platinum, palladium, or having any diamond, ruby, emerald, or
other precious stone, or any item containing sterling or fine
silver without being licensed.
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This bill would add to the definition of "organized crime" to
include the unlicensed operation of a secondhand dealer business
while not reporting to law enforcement daily acquisitions of
secondhand property.
This bill would authorize distribution of forfeited tangible
personal property, as specified, to also be distributed as
follows: (1) 45 percent distributed into the general fund of
the city, county, or city and county that instituted the
forfeiture; (2) 45 percent distributed to the general fund of
the city, county, or city and county that prosecuted the
forfeiture; and (3) 10 percent distributed to the Restitution
Fund.
This bill would prohibit the return of unclaimed property stolen
or embezzled to a pawnbroker or secondhand dealer who willfully
refused to consent to a statutory hold or a search warrant
resulted in seizure of the property.
This bill would provide that return of property by a law
enforcement agency required to be made to a person claiming to
be entitled to possession of a lost or stolen vehicle is not
required if the report of theft or loss of the vehicle into the
automated property system preceded the report of the acquisition
of the property by a licensed pawnbroker.
This bill would also make various conforming changes to the
above provisions.
COMMENT
1. Stated need for the bill
The author writes:
This bill attempts to curb the illegal trade in gold, silver,
gems, and other items that are subject to the pawn and
secondhand dealer licenses requirements in the [Business and
Professions] and Financial Codes. "Cash for gold", "weekend
hotel gold buyers", "the Tupperware model of having all your
friends bring their broken or unwanted gold jewelry to your
home and you will be handed cash for it on the spot" - All of
these require a valid secondhand dealers license. Yet,
generally, none of them are licensed.
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Why is this so important? Licensed secondhand dealers are
required to report to local law enforcement daily all
transactions of this type. [The Department of Justice] DOJ
must also be notified daily. Perhaps more importantly these
items must be held for 30 days for the purpose of inspection
by law enforcement. Law enforcement knows exactly where to go
to inspect because the items must be available at the
permanent address of the licensee. None of the gold buying
models mentioned above can or do comply.
Additionally the bill describes [the] manner in which police
may put an unlimited number of 90[-day] "holds" on merchandise
suspected of being "lost, stolen, or embezzled" and it should
be noted that the police may physically take possession of
such items, but the status of the item is still a hold[.]
[T]his preserves the property interest of the lender who has
perfected a lien on the property. In this way, after the item
has no more evidentiary value, the property interest is
maintained. If there is some other law enforcement or
prosecutorial reason to take an item from a pawnbroker that
has followed all of the legal requirements, a warrant can be
obtained and upon the conclusion of the criminal action, the
pawnbroker will . . . have due process when a disputed claim
of ownership arises. For those operating outside of the law,
as unlicensed traders, the items taken by law enforcement may
be seized and disposed as described in the bill. The elements
of the seizure in the bill have been rewritten under [Penal
Code Section] 186.2 at the request of the [California District
Attorneys Association].
2. Due process procedures
Existing law provides due process procedures for a pawnbroker to
challenge a competing claim to ownership of property seized by
law enforcement. (See Fin. Code Sec. 21206.8 and Pen. Code Sec.
1407 et seq.) Case law has held that these due process
procedures properly recognize that a pawnbroker, as the holder
of personal property that has been pledged by the purported
property owner in exchange for money, has a legitimate
possessory interest in the seized property. (See G&G Jewelry,
Inc. v. City of Oakland (1991) 989 F.2d 1093, 1098; Zeltser v.
City of Oakland (2003) 325 F. 1141, 1143-44.)
This bill would provide additional due process requirements for
the final disposition of property that is the subject of
competing claims by a purported property owner and pawnbroker.
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This bill would prohibit a peace officer, magistrate, court
clerk, or other person having custody of lost, stolen, or
embezzled property taken from a pawnbroker to deliver the
property to any person claiming ownership of the property
unless: (1) the person files a written statement, signed under
penalty of perjury, stating the factual basis upon which they
claim ownership or an interest in the property with the person
having custody of the property; and (2) the person having
custody of the property notifies the pawnbroker of the claim.
Additionally, this bill would require, at least 30 calendar days
before any hearing adjudicating any competing claims of a
pawnbroker and a person claiming ownership or an interest in the
property, the person having custody of the property to deliver
to the pawnbroker a true and correct copy of the police report
substantiating the basis of the seizure of the property from the
pawnbroker. Arguably, by requiring the purported owner to
validate his or her claim and require sufficient hearing notice
to be sent to the pawnbroker would further the Legislature's
goal of providing due process to the pawnbroker, as well as
potentially providing court efficiency since the court will have
more evidence upon which to adjudicate the claim.
3. Adjudication of competing property claims
Existing law provides that, when lost or stolen property has
been seized by law enforcement, the clerk or person having
charge of the property for any police department may, upon
satisfactory proof of ownership of the property, deliver the
property to the owner. (Pen. Code Sec. 1413(b).) Existing law
also requires that prior to delivery of the property to any
person claiming ownership, the peace officer, magistrate, court,
clerk, or other person having custody of the property must
notify the pawnbroker of the claim. (Pen. Code Sec. 1411.) If
the owner of the property has made no claim to the property, the
property must be returned to the secondhand dealer or
pawnbroker. (Id.)
However, as demonstrated in Zeltser v. City of Oakland (2003)
325 F. 1141, there is confusion as to the circumstances under
which law enforcement may release lost or stolen property,
seized pursuant to a warrant, to the purported owner. In
Zeltser, law enforcement seized a stolen ring from a pawnbroker
and returned the ring to the owner without notifying the
pawnbroker of a claim to the property. The City of Oakland
(City) argued that it followed existing law's requirement to
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deliver property upon a court order. The City claimed that the
court order declaring the owner's rightful title was the
criminal court's acceptance of the thief's guilty plea of
stealing the ring from the owner. The trial court adopted the
City's argument and held that "once property has been seized
pursuant to a valid warrant it is subject to Penal Code
[Section] 1536 and when the trial court determines that the
subject property was stolen from the alleged victim, a police
officer may return the subject property to the alleged victim.
No further notice of hearing or opportunity to be heard by the
person from whom the property was seized is required either by
the Court before whom the matter was heard or by the Court that
issued the warrant." (Id. at 1144.) The Court of Appeals,
Ninth Circuit, reversed the trial court's ruling and held that
the due process procedures under existing law entitle the
pawnbroker to an opportunity to assert his or her interest in
the property. (Id. at 1145.)
To address this confusion, this bill would provide that a civil
or criminal court, in adjudicating the competing claims of a
licensed pawnbroker or secondhand dealer and another party
claiming ownership or an interest in the property that is or was
subject to a law enforcement hold, to award possession of the
property only after due consideration is given to the effect of
Commercial Code Section 2403. Commercial Code Section 2403
provides that a purchaser of goods acquires all title which his
transferor had or had power to transfer, and the purchaser
maintains the right to title even if the delivery was procured
through fraud. That provision also maintains the rights of
other purchasers of goods and of lien creditors. Notably, this
bill would not limit the court's consideration only to the
provisions under Commercial Code Section 2403, but it, arguably,
provides guidance to reviewing courts as to the proper
disposition of lost or stolen property.
4. Opposition concerns
The California District Attorneys Association, in opposition,
asserts that this bill would "eliminate the authority of a peace
officer to make an immediate, plain view seizure of stolen
property as recognized in Christian v. Chester (1990) 218
Cal.App.3d 273. Before an officer could make a seizure, the
bill would require that he or she has to give the pawnbroker
written notification. Additionally, we are generally concerned
about attempted statutory search warrant restrictions that are
sought to protect business interests. Law enforcement has a
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duty to investigate and prosecute crime. The application for,
and the issuance of, search warrants are topics that are the
subject of much statute and volumes of case law. Jurisprudence
surrounding the lawful issuance of search warrants is a balance
between the right to be free from unlawful searches and the
necessity of law enforcement to enforce the law and protect the
public. The fiscal interests of one particular industry should
not trump this carefully struck balance and respectfully, we
feel this measure unduly restricts the ability of law
enforcement to do its job."
An individual also raises concerns about "what constitutes a
secondhand dealer. . . . By broadly defining secondhand dealer
as you have, you will penalize the activities of consumers,
churches, thrift shops, etc., if the purchasers and sellers are
not licensed and permitted."
Support : California Coin and Bullion Merchants Association;
California Police Chief's Association, Inc.
Opposition : California District Attorneys Association; one
individual
HISTORY
Source : California Pawnbrokers' Association
Related Pending Legislation : None Known
Prior Legislation :
SB 794 (May, 2011) See Background.
AB 1796 (Galgiani, 2012), would have included in the definition
of criminal profiteering activity the unlicensed sale of
tangible personal property or other secondhand goods, including
gold and other precious metals, without a license. AB 1796
failed passage in the Assembly Committee on Public Safety.
Prior Vote : Senate Committee on Public Safety (Ayes 7, Noes 0)
**************
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