ORDERS:
ORDER
STATEMENT OF THE CASE
This matter is before the Administrative Law Court (“ALC” or “Court”) pursuant to a Petition filed by the South Carolina Department of Consumer Affairs (“Department”) on February 5, 2007, alleging that Respondents are engaging in pawnbroking without the requisite Certificate of Authority in violation of the S.C. Pawnbroker’s Act, S.C. Code Ann. § 40-39-10 et seq. (“Act”), and seeking, among other things, an Order requiring Respondents to cease and desist from operating as a pawnbroker. A hearing was held before me on June 1, 2007 at the offices of the ALC in Columbia, South Carolina.
FINDINGS OF FACT
Having observed the witnesses and reviewed the exhibits presented at the hearing and closely passed upon their credibility, and having taken into consideration the burden of persuasion by the parties, I make the following Findings of Fact by a preponderance of the evidence:
1. On January 20, 2006, Barbara Ferrara, as the sole owner of Patriot Pawn, LLC, applied to the Department for a Certificate of Authority to operate as a pawnbroker at 6842 Rivers Avenue in North Charleston, South Carolina (“location”); that application was denied in February 2006, and Barbara Ferrara filed a request for a contested case hearing before the ALC seeking review of the Department’s denial. During the pendency of that contested case proceeding, the location operated as a retail sales store, buying, selling and trading goods of value.
2. In anticipation of receiving a Certificate of Authority, business cards and signs were purchased to promote the business. Ads were also placed in area phone books, listing the location under “Pawnbrokers.” Further, inventory and supplies were purchased. Included in those supplies were tickets purchased for use in pawn transactions. Because such a substantial amount of money was expended on those items, they were used in the interim in hopes that a Certificate of Authority would be granted.
3. In October 2006, Barbara Ferrara and Patriot Pawn, LLC, withdrew their request for a contested case hearing before the ALC. Thereafter, the location continued operation as Patriot Pawn Retail Sales (“Patriot Pawn”).
4. Sometime after the denial of the Certificate of Authority, based upon the signs in front of and affixed to the exterior of the location, the Department began an investigation into the operations at the location to determine whether it and its employees were engaging in pawnbroking activities without the requisite license.
5. The signs outside the building read “Patriot Pawn Retail Sales;” however the words “Patriot Pawn” are in a significantly larger font that those of “Retail Sales.” In fact, from a distance, the words “Retail Sales” are barely visible. Respondents continued to use these signs due to the additional expense involved in replacing them. Other signs on the windows of the building which indicate that the business engages in pawn transactions have been covered up.
6. The North Charleston Police Department (“NCPD”) performs property and background checks of certain businesses, including pawn shops. Detective Gary Zimmer, who worked for the NCPD for over ten (10) years, participated in several searches at the location.
7. On several occasions during the period from July 2006 to March 2007, the NCPD discovered stolen merchandise at the location. Also, the NCPD has sent confidential undercover informants into the location to attempt to engage in pawn transactions; however, none of those informants were successful in engaging in a pawn transaction at the location.
8. On or about March 27, 2007, the NCPD obtained a search warrant for the location. On or about March 28, 2007, Detective Zimmer utilized the warrant to search the location and he seized a number of sales tickets. Those tickets consisted of the standard forms used for transactions by pawn shops throughout South Carolina.
On the reverse side of each ticket is a notice that pawn brokers are regulated by the Department, as well as the terms and conditions of a pawn agreement. Persons who enter into a pawn transaction and later wish to redeem the pawned item must sign the reverse side of the ticket and remit it to the pawn shop before the item can be redeemed. These tickets can also be used as a bill of sale. The transaction was marked as a “buy” rather than a “pawn” on each ticket Detective Zimmer confiscated. Further, none of the tickets had a finance charge or annual percentage rate listed, nor were any of them signed by a pledgor on the reverse side to evidence redemption of any “pawned” items.
9. On one occasion, Detective Zimmer went to the location and personally purchased a weed eater.
10. In January 2006, Eugene W. Jones, III assisted the Ferraras in setting up the retail sales store at the location. He has prior experience in the pawn business and was previously licensed as a pawn broker by the Department.
Respondent Jones owned and operated Gene’s Pawn Shop from 1988 to 1993. In 1993, he was convicted of a felony drug charge and sentenced to 151 months in prison. Because of that conviction, he forfeited his Certificate of Authority. After his release from prison, from 2003 to 2005, Respondent Jones owned and operated a retail sales store, located inside Palmetto Pawn and Retail Sales, in Summerville, South Carolina. During that time he met David Ferrara, who was a customer at that store.
11. Respondent Jones began working as an employee of the location sometime around July 2006; it was at that time he began to receive a paycheck from Patriot Pawn.
12. David Ferrara previously owned Patriot Pawn as a sole proprietorship. However, as of January 2007, Eugene W. Jones, III is the current owner of that business.
13. Neither David Ferrara nor Eugene W. Jones, III have authorized any pawn transactions at the location.
14. Christine Morris alleges to have engaged in pawn transactions at the location at various times in 2006. However, copies of her purported “pawn” tickets were marked as “buy” rather than “pawn” transactions.
DISCUSSION
Pursuant to S.C. Code Ann. § 40-39-20, the Department is authorized to regulate the activities of pawnbrokers conducting business in the State of South Carolina. “Pawnbroker” is defined in Section 40-39-10(2) as “any person engaged in the business of lending money on the security of pledged goods, or engaged in the business of purchasing tangible personal property on condition that it may be redeemed or repurchased by the seller for a fixed price within a fixed period of time.” Further, Section 40-39-20 requires that any person engaging in the business of a pawnbroker must first obtain a Certificate of Authority from the Department.
In this case the Department alleges that Respondents have engaged in pawnbroking without the requisite Certificate of Authority, and thus have violated the provisions of the S.C. Pawnbroker’s Act, S.C. Code Ann. § 40-39-10 et seq. Specifically, the Department asserts that Respondents hold themselves out as pawnbrokers and are also attempting to operate a pawn shop under the guise of a retail sales operation. Accordingly, the Department seeks to have this Court order Respondents to cease and desist from engaging in pawnbroking.
In this case, there is insufficient evidence to show that Respondents have engaged in activities of a pawnbroker in violation of the Act. Clearly, the location began operation in early 2006 in anticipation that its Certificate of Authority would be granted. In doing so, it purchased promotional items such as business cards, placed signage on the exterior of the location, and placed ads in area phone books, advertising the location as a pawn shop. Further, it purchased sales tickets to use for transactions at the business.
The NCPD conducted several undercover operations and searches of the location over the past year, none of which revealed any evidence that “pawn” transactions were taking place at the location. During the March 2007 search of the location, officers seized a voluminous amount of sales tickets. However, each ticket seized was marked as a “buy” transaction; none were marked as a “pawn” transaction. Further, none of the confidential undercover informants were successful in engaging in pawn transactions at the location. Additionally, although Christine Morris testified at the hearing that she engaged in pawn transactions at the location, all of the sales tickets for her transactions were denoted as “buy” transactions.
Moreover, the fact that the location used sales tickets in its transactions does not evidence pawnbroking. Although those tickets are the standard form used for pawn transactions throughout this state, they may also be used as a bill of sale, and all transactions presented as evidence before the Court were clearly denoted as “buy” transactions. Also, none of the sales tickets were signed on the reverse side by a pledgor indicating that a “pawned” item had been redeemed.
In addition, the Department argues that Eugene W. Jones, III, who was convicted of a felony drug charge in 1993, is unable to work as an employee in a pawn shop, and that his employment with Patriot Pawn is a violation of the Act. S.C. Code Ann. § 40-39-20 provides:
A person convicted of a felony may not be issued a Certificate of Authority to carry on the business of a pawnbroker or in any manner engage in the business of a pawnbroker, except that any person who is in the business of a pawnbroker on July 1, 1988, and who has been convicted of a felony before this date may be issued a Certificate of Authority and upon receiving it may continue in the business of a pawnbroker but if this person is convicted of a felony on or after July 1, 1988, he may not thereafter be issued a Certificate of Authority or carry on the business of a pawnbroker after the date of this subsequent felony conviction.
According to the Department and their interpretation of Section 40-39-20, convicted felons cannot be employed at a pawnshop in any capacity. However, the plain language of the statute does not prohibit convicted felons from being employed at a pawn shop, but from merely carrying on or engaging in the business of a pawnbroker. In this case, there has been no evidence that Respondent Jones has either carried on the business of a pawnbroker or engaged in pawnbroking in any manner. Rather, Respondent Jones has only participated in retail sales/“buy” transactions at the location. In fact, there has been no evidence presented that anyone at the location has engaged in any pawnbroking or that it operates as a pawn shop. Accordingly, Respondent Jones employment there is not prohibited.
The Department further asserts that Respondents hold themselves out as pawnbrokers in violation of the Act. Although Respondents covered the signs on the windows of the building indicating that they engaged in pawn transactions, the large signs at the exterior reading “Patriot Pawn Retail Sales” remain. The words “Patriot Pawn” appear on the signs in a font significantly larger than the words “Retail Sales;” it is difficult to read the words “Retail Sales” from any distance. Therefore, although I do not find that Respondents have engaged in pawnbroking at the location, I find that the signs reading “Patriot Pawn Retail Sales,” must be removed in order to avoid the appearance of the operation of a pawn shop at the location.
Finally, the Department alleges that Respondents have knowingly bought or received stolen merchandise in violation of S.C. Code Ann. § 40-39-140. The only evidence supporting this assertion is the testimony of Detective Zimmer that the NCPD had discovered stolen merchandise at the location on prior occasions. The Court does not find that there is sufficient evidence to support any violation of the Act.
Accordingly, I find there is insufficient evidence to show that Patriot Pawn, by and through its employees, or David Ferrara and Eugene W. Jones, II, individually, engaged in pawnbroking, and therefore, the Department does not have jurisdiction to regulate the activities at the location.
ORDER
Based upon the above Findings of Fact and Conclusions of Law,
IT IS ORDERED that Respondents remove all signs on the exterior of the building and elsewhere outside the location that read “Patriot Pawn Retail Sales” within 20 days of the date of this Order.
IT IS FURTHERMORE ORDERED that all other relief sought by Petitioner herein is DENIED.
AND IT IS SO ORDERED.
______________________________
Marvin F. Kittrell
Chief Administrative Law Judge
June 29, 2007
Columbia, South Carolina
The reverse sides of those tickets were not copied and therefore not available for review by the Court.
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