State ex rel. McGraw v. Pawn America
Annotate this CaseJanuary 1998 Term
__________
No. 24632
__________
STATE OF WEST VIRGINIA EX REL.
DARRELL V. McGRAW, JR., ATTORNEY GENERAL,
Plaintiff / Petitioner Below, Appellee
v.
PAWN AMERICA, a West Virginia busniess,
Defendant / Respondent Below, Appellant
and
STATE OF WEST VIRGINIA EX REL.
DARRELL V. McGRAW, JR., ATTORNEY GENERAL,
Plaintiff / Petitioner Below, Appellee
v.
PAWN AMERICA, a West Virginia busniess,
LISA FUNK, individually, and BRENT JACKSON, individually,
Defendants / Respondents Below
PAWN AMERICA, a West Virginia busniess,
Defendant / Respondent Below, Appellant
__________________________________________________________________
Appeal from the Circuit Court of Berkeley County
Honorable Thomas W. Steptoe, Jr., Judge
Civil Action No. 97-P-17
AFFIRMED
__________________________________________________________________
Submitted: May 6, 1998
Filed: July 17, 1998
Richard G.
Gay Jill
L. Miles
Berkeley Springs, West
Virginia Deputy
Attorney General
and Charli
Cooper Fulton
Franklin D.
Cleckley Assistant
Attorney General
Morgantown, West Virginia
Charleston, West Virginia
Attorneys for
Appellant Attorneys
for Appellee
Timothy
C. Winslow
Charleston,
West Virginia
Attorney
for Amicus Curiae
West
Virginia Division of Banking
Deborah
M. Zuckerman
Washington,
D.C.
Attorney
for Amicus Curiae
American
Association of
Retired
Persons
JUSTICE McCUSKEY delivered the Opinion of the Court.
JUSTICE STARCHER concurs and reserves the right to file a separate opinion.
SYLLABUS BY THE COURT
Pursuant to W. Va. Code § 46A-1-105 (1996), licensed pawnbrokers are excluded from the coverage of the West Virginia Consumer Credit and Protection Act insofar as they engage in true pawn transactions that are within the scope of a valid pawnbroker's license. However, this exclusion is not applicable to activities which are not true pawns and are beyond the scope of such license and, thus, ultra vires.
McCuskey, Justice:
This matter is before this Court upon the March 28, 1997, final order of the Circuit Court of Berkeley County. Pursuant to that order, the circuit court ordered that the appellant, Pawn America, produce certain documents described in a subpoena duces tecum issued by the Consumer Protection Division of the West Virginia Attorney General's office in connection with its investigation of the appellant's business practices. The central issue on appeal is whether the appellee, Darrell V. McGraw, Jr., Attorney General, has the authority to investigate Pawn America to determine whether it has engaged in acts which violate the West Virginia Consumer Credit and Protection Act, W.Va. Code § 46A-1-101, et seq. (1974). The appellant requests that this Court declare that the Attorney General has been acting outside of his delegated authority and, further, that we prohibit enforcement of the investigatory subpoena issued to Pawn America. We conclude that the Attorney General has the statutory power under the Act to conduct the investigation which his office has commenced. We also find that the lower court did not err with respect to its rulings on the enforceability of the subpoena. Accordingly, we affirm the decision of the circuit court.
I.
FACTS
Pawn America is an unincorporated sole
proprietorship which is located in Martinsburg, West Virginia. At all times relevant to
this case, Pawn America has held a pawnbroker's license issued by the City of Martinsburg
under its "Secondhand Dealers" ordinance. The State of West Virginia has not
undertaken to license pawnbrokers, and, consequently, Pawn America holds no state-issued
pawnbroker's license.
The Attorney General's
investigation of Pawn America was prompted by a consumer complaint lodged with the
Consumer Protection Division. Based upon the consumer's claims regarding his dealings with
Pawn America, as well as the testimony of other Pawn America customers, the Attorney
General began an investigation to determine whether Pawn America's business practices
violated the West Virginia Consumer Credit and Protection Act, W.Va. Code §
46A-1-101, et seq. (1974). The particular transaction attested to by consumers,
termed a "title pawn," was described by the circuit court in its final order as
follows:
A consumer approaches Pawn America with the intent to borrow money; in exchange for the
money being lent, the consumer is required to deliver to Pawn America a clear certificate
of title to his/her motor vehicle and to endorse the title in blank; the consumer is
required to pay a fee of 25% of the loan amount for a two week loan (which translates into
an interest rate of 65% when annualized); that the loan may be renewed for additional
two-week periods so long as the consumer pays an additional 25% "finance charge"
for each such two-week period; that the consumer is permitted to retain possession of the
vehicle unless, and until, he/she defaults on a payment; and Pawn America does not store
the motor vehicle on which it loans money at its Martinsburg location, rather if the
consumer does not pay the amounts owed to Pawn America in a timely fashion, then Pawn
America "repossesses" the consumer's vehicle.
On December 9, 1996, the
Attorney General issued a subpoena duces tecum, seeking business records from Pawn
America. The subpoena was served upon Pawn America the next day. Pawn America refused to
produce the requested documents without a court order. Therefore, on February 5, 1997, the
Attorney General filed a petition for enforcement of the subpoena in the circuit court.
On March 10, 1997, the
circuit court held a hearing on the Attorney General's petition, and on March 28, 1997,
the circuit judge issued a final order enforcing several of the subpoena demands and
quashing others. On April 8, 1997, the circuit court entered an order which stayed its
final order pending the outcome of this appeal.
II.
STANDARD OF REVIEW
"Where the issue on an appeal
from the circuit court is clearly a question of law
or involving an interpretation of a statute, we apply a de novo
standard of review." Syl. Pt. 1, Chrystal R. M. v. Charlie A. L., 194 W. Va.
138, 459 S.E.2d 415 (1995). This appeal presents both a question of law and involves
statutory interpretation. Accordingly, we apply a de novo standard of review.
III.
DISCUSSION
The central issue before this Court is
whether the Attorney General has the statutory power to investigate Pawn America for
suspected violations of the West Virginia Consumer Credit and Protection Act, W.Va.
Code § 46A-1-101, et seq. In order to resolve this question, we must first
determine a threshold issue: whether Pawn America's alleged "title pawn"
transactions fall within the exclusion from the Act for "licensed pawnbrokers."
West Virginia Code § 46A-1-105 (1996) states: "This chapter does not apply to: . . . (4) Licensed pawnbrokers." Pawn America contends that this provision gives licensed pawnbrokers a blanket exemption from the Act's coverage and that the circuit court erroneously disregarded this exemption in enforcing the Attorney General's investigatory subpoena. We disagree. For reasons set forth below, we conclude that the Act's exemption does not preclude the investigation of acts which are not true pawns and are beyond the scope of a pawnbroker's license.
As indicated earlier, Pawn America holds a
pawnbroker's license issued by the City of Martinsburg. This license allows Pawn America
to receive and sell "secondhand personal property." Under the Martinsburg
"Secondhand Dealers" ordinance, which regulates pawnbrokering in that city,
there is a specific exemption for "[p]ersonal property which is subject to and has
been issued a title under the provisions of the laws of the State of West Virginia or any
other State." In addition, another provision of the ordinance mandates that
"[a]ll secondhand personal property obtained by a purchaser shall be stored at the
business location in Martinsburg, West Virginia, where it was purchased . . . ." West
Virginia Code § 17A-3-2 (1992) requires, generally, that all motor vehicles and
recreational vehicles which are driven or moved upon a highway must be titled by the West
Virginia Department of Motor Vehicles. Given that Pawn America was apparently lending
money in exchange for the titles of motor vehicles and failing to store these vehicles at
its Martinsburg business location, its "title pawn" activity was in violation of
the Martinsburg "Secondhand Dealers" ordinance which regulates pawnbrokers.
Because such activity was entirely outside of the scope of Pawn America's license from the
City of Martinsburg, and, thus, ultra vires, the exemption under the Consumer
Credit and Protection Act for a "licensed pawnbroker" is not applicable to the
"title pawn" transactions in which Pawn America allegedly engaged.
The only West Virginia case relied upon by Pawn America is First National
Bank v. Harkness, 42 W.Va. 156, 24 S.E. 548 (1896). This century old
case dealt with the pledge of 1800 barrels of crude oil. The transaction at issue was a
commercial one, involving neither a consumer loan nor a pawnbroker. In view of these
distinctions, Harkness is not determinative, or even persuasive, in a statutory
consumer protection case, such as this, where entirely different principles of remedial
statutory construction and application apply. Furthermore, what Harkness stands
for, at best, is that at common law, if actual delivery in a commercial pledge were not
practicable due to the nature of the goods, then symbolic delivery would suffice. The
critical difference in this case is that automobiles are susceptible to actual delivery to
the lender or pledgee, i.e., Pawn America.
In Commonwealth v. Car
Pawn of Virginia, Inc., 37 Va. Cir. 412 (1995), the Virginia Court applied a
substantially similar statute to the same facts as in the instant case and concluded that
the Legislature did not exempt "title pawns" from consumer loan regulation when
it set forth a "pawnbroker" exemption to the state's consumer protection laws.
The court in Car Pawn insightfully found that
Car Pawn is essentially an unlicensed
finance business which violates . . . the Consumer Finance Act. Notwithstanding that Car
Pawn attempts to receive pawns of automobiles, the business does not actually retain the
pawned vehicles in most cases. Moreover, if redemption does not occur within the stated
period, the customer may continually renew the pawn indefinitely. In form, this
transaction mimics a pawn; at heart it is simply a small loan . . . with an excessive
interest rate.
Id. at 416.
Moreover, given West
Virginia's comprehensive remedial scheme for the regulation of consumer lending, this
Court believes it would be absurd to suppose that in enacting a "licensed
pawnbroker" exemption to the Consumer Credit and Protection Act, our Legislature
intended to allow a consumer loan company, like Pawn America, to go entirely unregulated
with respect to every aspect of a loan when the transaction is a "pawn" in name
only, and in reality a consumer loan with an usurious interest rate -- not a true pawn.
Accordingly, under the
circumstances of this case, we hold that pursuant to W. Va. Code § 46A-1-105
(1996), licensed pawnbrokers are excluded from the coverage of the West Virginia Consumer
Credit and Protection Act insofar as they engage in true pawn transactions that are within
the scope of a valid pawnbroker's license. However, this exclusion is not applicable to
activities which are not true pawns and are beyond the scope of such license and, thus, ultra
vires.
Since we find that the "title
pawn" activity, which is the subject of the Attorney General's investigation, is
covered by the Consumer Credit and Protection Act, we now turn to consider whether the
circuit court nonetheless erred in requiring the production of certain documents sought by
the investigatory subpoena and quashing the subpoena as to the rest.
The circuit judge ordered production of
the documents demanded in paragraphs 1, 4, 6, 7, 8 and 11 of the Attorney General's
subpoena under the "required records" doctrine, notwithstanding Pawn America's
assertion of the Fifth Amendment privilege against self- incrimination. The Fifth
Amendment of the United States Constitution provides that "[n]o person . . . shall be
compelled in any criminal case to be a witness against himself . . . ." In proper
circumstances, the owner of a sole proprietorship can successfully invoke this privilege. Bellis
v. United States, 417 U.S. 85, 87-88 (1974). However, in Shapiro v. United States,
335 U.S. 1 (1948), the United States Supreme Court held that the privilege against
self-incrimination "cannot be maintained in relation to 'records required by law to
be kept in order that there may be suitable information of transactions which are the
appropriate subjects of governmental regulation, and the enforcement of restrictions
validly established." Id. at 32-33. In Grosso v. United States, 390 U.S. 62 (1968), the Supreme Court articulated the following requisites for application of
the "required records" doctrine: (1) the purposes of the governmental inquiry
must be essentially regulatory; (2) information is to be obtained by requiring the
preservation of records of a kind which the regulated party has customarily kept; and (3)
the records themselves must have assumed "public aspects" which render them at
least analogous to public documents. Id. at 67-68. The doctrine has been held to
apply specifically to sole proprietors, such as Pawn America. In re Grand Jury
Subpoena, 21 F.3d 226 (8th Cir. 1994). We find that all three factors set forth in Grosso
are present in this case with respect to the documents which Pawn America was ordered to
produce. Thus, we find no error in the circuit court's determination that Pawn America's
assertion of the Fifth Amendment privilege was foreclosed as to those documents.
The Attorney General
asserts, as a cross assignment of error, that the lower court erred in quashing the
subpoena as to the records demanded in paragraphs 2, 3, 5, 9, 10, 12, 13, 14 and 15
thereof. Under the particular facts of this case, we find no error in this ruling, which
the circuit court prefaced upon its finding that the documents' production was foreclosed
by the asserted Fifth Amendment privilege. Once the privilege is asserted, "[i]t is
the duty of a court to determine the legitimacy of a witness' reliance upon the Fifth
Amendment." Roberts v. United States, 445 U.S. 552, 560 n.7 (1980). "[I]f
the witness, upon interposing his claim, were required to prove the hazard in the sense in
which a claim is usually required to be established in court, he would be compelled to
surrender the very protection which the privilege is designed to guarantee." Hoffman
v. United States, 341 U.S. 479, 486 (1951). Moreover, in considering the propriety
of a trial court's ruling permitting a witness to invoke the Fifth Amendment, this Court
is mindful that "[t]he trial judge in appraising the claim 'must be governed as much
by his personal perception of the peculiarities of the case as by the facts actually in
evidence.'" Id. at 487.
IV.
CONCLUSION
Upon all of the foregoing, the decision of the circuit court is affirmed.
Affirmed.
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