This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1998).




County of Washington,



National Pawnbrokers, Inc.,


G. Richard Slade, et al.,


Filed May 11, 1999


Willis, Judge

Washington County District Court

File No. C9981114

Douglas Johnson, Washington County Attorney, George Kuprian, Assistant County Attorney, 14949 62nd Street North, Stillwater, MN 55082 (for respondent County of Washington)

Stuart E. Gale, Elder-Jones Building, Suite 101, 9301 Bryant Avenue South, Bloomington, MN 55420 (for appellant)

Steven L. Thessfeld, Yost & Baill, LLP, 2350 One Financial Plaza, 120 South Sixth Street, Minneapolis, MN 55402 (for respondents Slade)

Considered and decided by Schumacher, Presiding Judge, Willis, Judge, and Foley, Judge.[*]



On appeal from summary judgment, National Pawnbrokers, Inc. ("National"), challenges the district court's (1) determination that the owners' right to stolen property was superior to National's interest in the property; (2) failure to determine that an estoppel issue precluded summary judgment; (3) denial of National's motion to quash the search warrants that were used to seize the property from the company; and (4) denial of National's motion to amend its answer and cross-claim against the county for alleged destruction of its property right. We affirm.


In 1996, Mary Carr Slade stole property from her parents' home in Washington County and pawned the items at National's locations in Bloomington and St. Paul. She confessed to the theft and produced the pawnbroker's receipts. In July 1996, she pleaded guilty. Sometime during the summer, the police asked National to relinquish the property, but the company refused to do so, claiming it had a perfected security interest. Slade was sentenced in October 1996.

In November 1996, a sergeant from the Washington County Sheriff's Office applied to the district courts in Ramsey and Hennepin counties for search warrants. The officer's affidavits stated (1) that the property described in the affidavits and located on National's premises was stolen; (2) it constituted evidence that tended to show a crime had been committed; (3) the officer had learned that Slade had stolen the property and had produced the pawn tickets from National; (4) National had refused to surrender the property voluntarily; and (5) a search warrant was necessary to regain possession of the stolen items. The affidavits did not reveal that Slade had already pleaded guilty. The search warrants were issued and executed.

On November 12, 1996, National petitioned the court in the criminal proceeding to quash the search warrants and return the property on the grounds that (1) it had a valid security interest in the property and (2) the search warrants were not necessary because Slade had already been adjudicated guilty and the property was not, therefore, necessary as trial evidence.

The county opposed the motion, arguing that National "had no claim of right or title to the property" because Slade's parents had "a claim as the rightful owners" of the property. The county requested leave to file an interpleader action to allow the district court to resolve the competing claims to the property that the county held. The court denied the motion to quash and granted the county's request.

The county then filed the interpleader action that is the basis of this appeal. National answered, again contending that (1) the warrants were unnecessary; (2) it had a security interest; and (3) "in accordance with the rules of Pawn, Mary Carr Slade, or anyone claiming by or through her, had lost any rights to redeem the subject property." National asserted in a cross-claim against Slade's parents that they were estopped from claiming an interest in the property. Slade's parents cross-claimed against National, denying that National had a valid security interest and alleging their right to the property.

Slade's parents moved for summary judgment. National opposed the motion and moved for an order (1) quashing the warrants; and (2) allowing National to amend its answer to add a counterclaim against the county for wrongful taking of, and destruction of, National's property right. The county opposed the motions. The district court granted summary judgment to Slade's parents and denied National's motions. This appeal followed.


1. Superiority of interest. On appeal from summary judgment, a reviewing court must determine whether genuine issues of material fact exist and whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). Although a reviewing court must view the evidence in the light most favorable to the nonmoving party, Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993), a genuine issue of material fact must be established by substantial evidence. DLH, Inc. v. Russ, 566 N.W.2d 60, 70 (Minn. 1997).

The district court determined that, because Slade stole the property, National did not acquire a right in the property superior to that of Slade's parents. National claims that Slade had voidable title, which was sufficient for her to grant a security interest to National. For support, National cites National Pawn Brokers, Unlimited v. The Osterman, Inc., 500 N.W.2d 407, 411-12 (Wis. Ct. App. 1993), which held that a buyer who purchased property by means of a check that was subsequently dishonored had voidable title and, therefore, had the authority to transfer a security interest.

Article 9 of the Uniform Commercial Code, relating to secured transactions, has been adopted by Minnesota. State Bank of Am. v. Wagener, 479 N.W.2d 92, 94 (Minn. App. 1990), review denied (Minn. Mar. 10, 1992). Pursuant to Article 9, a security interest is enforceable against a debtor or a third party with respect to collateral and attaches only if:

(a) the collateral is in the possession of the secured party pursuant to agreement * * * or the debtor has signed a security agreement which contains a description of the collateral * * *;

(b) value has been given; and

(c) the debtor has rights in the collateral.

Minn. Stat. § 336.9-203(1) (1998).

If the goods are owned by a third party, the debtor's mere acquisition of possession is insufficient to acquire "rights in the collateral." 4 James White & Robert Summers, Uniform Commercial Code § 31-6, at 126 (4th ed. 1995); see also State Bank, 479 N.W.2d at 95 (concluding that debtor had possession of pigs merely to fatten them and did not have owner's agreement to use pigs as security; therefore, debtor did not acquire sufficient rights in collateral for bank's security interest to attach).

The requirement of `rights in the collateral' illustrates the general principle that `one cannot encumber another man's property in the absence of consent, estoppel, or some other special rule.' * * * Thus a debtor possesses sufficient rights in collateral if the true owner agrees to the debtor's use of the property as security or if the true owner is estopped to deny creation of the security interest.

State Bank, 479 N.W.2d at 95 (quoting In re Cook, 63 B.R. 789, 798 (Bankr. D. N.D. 1986)) (citations omitted).

In support of their motion for summary judgment, Slades' parents detailed how and when they acquired the property, and they submitted Slade's written confession and the transcript of her guilty plea. These unrefuted documents support the court's determinations that Slade's parents owned the property; that they did not agree to allow their daughter to use their property as security; and that, therefore, National did not acquire sufficient rights in the property to overcome the owners' rights in the property.

National's reliance on Osterman is misplaced. Osterman involved a debtor who had voidable title to collateral because he purchased the property with a check that was subsequently dishonored. 500 N.W.2d at 411. A person with voidable title can transfer title to a good-faith purchaser for value and can transfer a security interest to a creditor. Id. The debtor in Osterman, therefore, had sufficient rights in the collateral to allow the creditor's security interest to attach. Id. In contrast, Slade stole the property from her parents and, therefore, did not have any title to the property, voidable or otherwise.

2. Estoppel. National claims that it produced sufficient evidence to create an estoppel issue that precludes summary judgment. National bases its estoppel claim on the affidavit of its chief executive officer, Daryl Shiber, who stated that (1) Slade had pawned a number of the same items previously; and (2) that on one occasion prior to the 1996 transactions, Slade's father represented that he was helping Slade redeem her property from pawn. National also maintains that each time Slade pawned property, she signed a statement representing that she had the right to do so.

To prevail on an estoppel theory, National has the burden of showing facts that demonstrate the reasonableness of its reliance on Slade's apparent authority to pawn the property. See Farmers Sec. State Bank v. Voegele, 386 N.W.2d 760, 763 (Minn. App. 1986) (stating that bank had burden of proving estoppel and reasonableness of its reliance on husband's representation that he, as an individual, had authority to encumber property he co-owned with his wife). National claims Slade had previously pawned some of the property. But National thereby impliedly concedes that some of these items had not been pawned previously. The record fails to show that Slade had apparent authority to pawn the property that had not been pawned previously. Further, National does not identify the property it claims Slade pawned previously or the property it claims her father represented was hers. Moreover, a computer printout attached to Shiber's affidavit shows that in 1995 Slade pawned 19 items over the course of the year, with no indication of their value. But Slade's statement to the police showed that she stole and pawned dozens of items in 1996 in less than 2 months, and many of the pawn transactions were with National. The record also shows she pleaded guilty to theft of property worth more than $35,000. In light of the frequency of transactions and the quantity and value of items pawned in 1996, National's allegation that Slade had previously pawned some of these items does not create a fact issue concerning her apparent authority to pawn dozens of items worth more than $35,000 in 1996 or the reasonableness of National's reliance. Further, several of the pawn tickets are unsigned, contradicting National's claim that it relied on Slade's signature as proof of her apparent authority to use the property as collateral.

3. Motion to quash. When reviewing the legality of a seizure or search, an appellate court will not reverse a district court's findings unless they are clearly erroneous or contrary to law. In re Welfare of G.M., 560 N.W.2d 687, 690 (Minn. 1997). The district court, concluding that the warrants were validly issued, denied the motion to quash. National contends that, under Minn. Stat. § 626.04 (1998), a pending trial is a prerequisite to a legal seizure by warrant.

A search warrant is in the nature of a criminal process; it may not be used in the course of a civil action to protect a mere private right. 1 Wharton Charles E. Torcia, Criminal Procedure, § 152 at 579-80 (13th ed. 1989). Minn. Stat. § 626.07 (1998) provides, in part, that a search warrant may issue on any of the following grounds:

(1) The property or things were stolen or embezzled; [or]

* * * *

(3) The possession of the property or things constitute a crime; [or]

* * * *

(5) The property or things to be seized consist of any item or constitute any evidence which tends to show a crime has been committed, or tends to show that a particular person has committed a crime.

If the judge is satisfied that the grounds for the application exist, or there is probable cause to believe they exist, the judge must issue a search warrant. Minn. Stat. § 626.11 (1998).

A search warrant is an investigatory tool issued to gather evidence of crime. See In re Search Warrant v. Rozman, 586 N.W.2d 273, 276 (Minn. App. 1998) (stating search warrant is issued for investigation of crime). When property seized is no longer needed as evidence at trial, Minn. Stat. § 626.04 provides, in part:

When any officer seizes, with or without warrant, any property or thing, it shall be safely kept by direction of the court as long as necessary for the purpose of being produced as evidence on any trial. After the trial the property or thing shall, unless otherwise subject to lawful detention, be returned to its owner or any other person entitled to possess it.

Further, if property is no longer needed as evidence in a prosecution because charges are dismissed, it must be returned either to its owner or to the person entitled to possess it. See State v. Sutterfield, 347 N.W.2d 295 (Minn. App. 1984). If the state cannot retain possession of property seized before prosecution when a charge is subsequently dismissed, it necessarily follows that the state cannot rightfully obtain possession of property by search warrant after prosecution is completed.

The property was not needed in the investigation of Slade's theft because she had already pleaded guilty when the warrants were issued. She could not be prosecuted twice for theft of those goods, because jeopardy had attached. See United States v. Halper, 490 U.S. 435, 440, 109 S. Ct. 1892, 1897 (1989) (Double Jeopardy Clause protects a criminal defendant from second prosecution for same offense after conviction). The county attempts to justify its application for the warrants on the ground that it had probable cause to believe that National was in possession of stolen property. But while possession of stolen property is a crime, the record does not show that the county intended to investigate or prosecute National for theft. The county opposed National's motion to quash and return the property in State v. Slade, arguing that (1) National had no claim of right or title to the property because Slade's parents, as the victims of the criminal action, had a claim as the rightful owners; and (2) the proper method to resolve the dispute was through an interpleader action. Viewing the evidence in the light most favorable to National, the reasonable inference is that the county took the property to allow ownership to be determined in a civil suit.

But while we do not condone the county's actions, no substantial benefit will be accomplished by reversing the district court on this issue. See Moose v. Vesey, 225 Minn. 64, 68, 29 N.W.2d 649, 652 (1947) (stating that reviewing court will not reverse district court's order, even if technically wrong, if no substantial benefit will be accomplished by reversal). The warrants have already been executed. It is too late to quash them. In any event, granting the motion to quash merely decides the issue of possession; it does not resolve the ultimate issue of ownership. Because the district court correctly determined that Slade did not have rights in the collateral to grant a security interest to National that was enforceable against Slade's parents' right as owners of the property, the possession issue is moot.

4. Motion to amend. A reviewing court will not reverse a district court's decision whether to permit a party to amend pleadings absent a clear abuse of discretion. LOL Fin. Co. v. Romain Corp., 352 N.W.2d 841, 844 (Minn. App. 1984). A district court does not abuse its discretion in denying a motion to amend when the movant fails to establish evidence to support its claim. Copeland v. Hubbard Broad., Inc., 526 N.W.2d 402, 405 (Minn. App. 1995).

National moved to amend its answer to interpose a counterclaim against the county, alleging that (1) the county destroyed its property rights in the goods described in the interpleader action; and (2) the county's behavior violated the Fourth Amendment to the United States Constitution; Article I, Section 10 of the Minnesota Constitution; and Minn. Stat. §§ 626.04 and 3.736 (1996). The district court denied the motion. On appeal National challenges the district court's denial on the ground that the county deprived National of "a perfected possessory security interest." We disagree.

The district court accurately concluded that Slade did not have rights in the collateral to grant an enforceable security interest to National. The county could not, therefore, have destroyed a perfected security interest. Further, the issue of illegal seizure under the Fourth Amendment and Article I, Section 10 of the Minnesota Constitution is irrelevant to the issue of ultimate ownership, which was correctly resolved by the district court. Moreover, while Minn. Stat. § 626.04 requires an officer to return seized property that is no longer needed as evidence at trial to the owner or person entitled to possession, the district court determined that Slade's parents were both the owners and the persons entitled to possession. Accordingly, there is no violation of the statute.

Minn. Stat. § 3.736 (1996) provides for a tort action against the state for damages resulting from loss of property caused by an act or omission of an employee of the state while acting within the scope of the employee's office or employment. But National has failed to articulate a cognizable claim for damages. It did not have a perfected security interest, and, as a result of the district court's determination of ownership, it did not have the right to keep the stolen property. The district court's denial of the motion to amend was not, therefore, an abuse of discretion.


[*] Retired judge of the Minnesota Court of Appeals, serving by apointment pursuant to Minn. Const. art. VI, § 10.