National Pawn Brokers Unlimited v. Osterman, Inc.

On November 24, 1990, Donald Pippin purchased jewelry in the amount of $39,750.38 from Osterman, Inc. (defendant) in Wisconsin. Pippin signed a sales agreement indicating that Osterman would retain title to the jewelry until payment in full was received. Also, Pippin signed a retail charge agreement that (1) granted Osterman a security interest in the jewelry, (2) provided ownership remained with Osterman, and (3) prohibited Pippin from disposing of the jewelry or encumbering it without Osterman’s permission in writing. Pippin paid the initial $30,000 on his installment credit plan for the jewelry with a bad check, drawn from an account that was already closed. Despite knowing that Osterman reserved title and agreeing not to dispose of the jewelry, three days later, Pippin pawned a portion of the jewels to National Pawn Brokers (National) and Hull Loan Systems (Hull) (plaintiffs) in Minnesota. Pippin gave National the jewelry for a loan in the amount of $6,995.00. In addition, three days later, Pippin pawned the rest of the jewelry to Hull for a loan in the amount of $2,076.04. The following week, a criminal complaint was filed against Pippin, and pursuant to a request from Wisconsin police, Minnesota police seized the jewelry from National and Hull. The Wisconsin police returned the jewels to Osterman but reclaimed them the next day as evidence for Pippin’s upcoming criminal trial, which resulted in Pippin’s conviction. On December 26, 1990, National and Hull petitioned a Wisconsin court to get the jewelry back. On February 12, 1991, Osterman also petitioned for the return of the jewelry. On August 13, 1991, a trial court ordered that the jewelry be returned to Osterman. The pawnbrokers appealed. On appeal, Osterman argued that the pawnbrokers’ security interests in the jewelry did not attach, because Pippin did not have rights in the collateral.