Consignment Caveat: Tips to avoid misundertandings, scams and property loss

By Pat Sherman

“

I’m having a severe problem getting paid by this company.

”“

They’re hanging up on me;

saying the owner is out of town.

”“

I trusted them.

”During the past five months,

La Jolla Light

has received several complaints about consignment and resale businesses. Alleged problems include: delayed or partial payment; being paid less than an amount agreed upon in a contract; not having items returned to the owner upon request; or having gems in jewelry pieces swapped for cheaper grade stones or altered without the owner’s consent.

The consignors — those who place items such as jewelry, clothes or designer purses in the hands of another to sell (the consignee), but retain ownership until the goods are sold — are also quick to note, however, previous exchanges and successful transactions with reputable consignment businesses operating in La Jolla.

A common thread among those interviewed for this story and who experienced problems was the stream of excuses as to why property had not been returned or, if sold at consignment, why the owner had not been paid.

For nearly two weeks last November, retired sheet metal worker James Hall stood in front of Winchell Jewelry Designs (aka Winchell Designs) on Wall Street, brandishing a large sign that alleged, “Karl Winchell stole my $13,000 ring.”

In complaints filed with both the California Attorney General’s office and the San Diego Better Business Bureau (BBB), Hall states that in May 2013, he left a diamond engagement ring he purchased for more than $13,200 with Winchell, to be sold for a minimum of $8,000. Hall said when he phoned Winchell a month later to tell him he had a potential buyer for the ring who wished to stop by and see it, Winchell told him it was on display in the front window of the business.

However, Hall said that when he and the buyer arrived, the ring was not there. He said Winchell told him it had been sent to a business for laser enhancement to increase its marketability (without Hall’s consent). Hall said when he called next at the end of summer to inquire again about his ring he was told it was on a “jewelry road show” where it was being shown to potential buyers (again, without his consent).

Hall said that when he visited the store again in October, Winchell told him a buyer willing to pay more than $10,000 for the ring had placed a $5,000 down payment on it (though Hall said he received no money at that time).

To date, Hall claims he has not gotten his ring back, nor been paid anything for it.

Approached by the

Light

at his store in November, Winchell conceded that he had not yet paid Winchell for the ring, “because people are making payments on it,” he said. “It’s on layaway.”

Asked for further comment, Winchell said, “I would rather talk to a judge and have the courts handle it.”

In a letter to the local BBB office responding to Hall’s complaint, Winchell said he sold the ring for $9,000, though added, “I cannot pay Mr. Hall until I have received full payment on this ring due to store policy.”

Hall filed a claim for $10,000 against Winchell in small claims court (the maximum allowed), claiming that, “he altered and sold the ring without my permission.”

Winchell postponed the initial court date, and it has been rescheduled for April 10.

To hell in a handbag

La Jolla resident Teresa Meng says she left several high-ticket, designer items to be sold at Vintage Hollywood Consignment (located at 7920 Ivanhoe Ave. before the business abruptly closed its doors last year, and its remaining inventory was sold at auction).

Meng said she left Louis Vuitton purses, clothes and other designer accessories to be sold at the shop.

Meng said the owner, Mary Amber Dupree, came to her home and selected the items she thought she could sell, and the two signed a consignment contract outlining the percentage Meng was to be paid.

“Every time an item would sell she would say that she had to lower the price, so she would only give me a fraction of the promised price — without my consent,” Meng said. “We started to get into arguments. … When I was ready to pick up all my stuff, she disappeared and my Louis Vuitton purses were gone.”

Meng took Dupree to small claims court, wining a judgment for more than $2,200 on her original claim of $10,000. According to the complaint, Meng sued for “breach of contract” and “fraud.”

“When I went to collect, she was nowhere to be found. In her bank account — I levied it — there was only $130, so that’s how much I got.”

Another La Jolla woman who left items with Vintage Hollywood Consignment (but asked that her name not be used) said she left about $20,000 worth of merchandise at the store, including Chanel shoes, a designer purse and other items, though she alleged Dupree only paid her $400 before closing shop, and none of her property was returned.

“(At one point) she told me someone had come into the store and stolen some of my property,” the woman said, noting that the contract she signed stated that as the consignor she was responsible for her own insurance — and to her dismay, she later realized was not covered for the loss by her homeowners policy.

The woman filed a complaint with the San Diego City Attorney’s office, though she was told the matter was considered a civil case because more victims were needed to pursue criminal charges.

The owner of the property, La Jolla Pacific, LLC filed suit against Dupree in San Diego Superior Court in August for nonpayment of rent on the consignment space (unlawful detainer).

Kathryn Lange Turner, a deputy city attorney with the City Attorney’s Consumer and Environmental Protection Unit, confirmed that her office received the second woman’s complaint, though she said they are viewing the matter as a business failure, and not a theft.

“The decision to consign an item is a business decision and unfortunately there are risks associated with all business decisions,” Turner said. “Our recommendation to possible victims of a business failure is to seek the advice of a civil attorney for a possible civil court action.”

Turner said analyzing whether a loss in connection with a business failure might also be a crime can be difficult to discern.

“If it’s a crime, they’ll need evidence that (the business) intentionally closed and intentionally were withholding the property, and (that is) theft,” Turner said. “We need that strong evidence of intent to ‘permanently deprive’ — words used under the penal code — the true owner of the property.”

Turner said the city attorney’s office successfully prosecuted two consignment shops for criminal activity in La Jolla — one in 2000 (La Jolla Consignment) and another in 2003 (Designer Consignor) — though she said there haven’t been any consignment prosecutions in La Jolla since.

“We have business failure complaints that we haven’t even filed on because we just don’t have evidence of a crime,” Turner said. “We always leave open the possibility of new evidence being uncovered or brought to our attention.”

Consumer recourse?

Turner suggests that victims of possible consignment scams fill out a complaint form available on the city attorney’s website (see sidebar). She also suggests victims file a police report and obtain an incident number.

Before entering into a consignment agreement, Turner said, a consignor should make sure they have a signed consignment contract and receipt, plus photographs of items left with the consignee, serial numbers (if available) and copies of an appraisal (for high-end items).

All about the contract

Attorneys Robert L. Hyde and Abbas Kazerounian, adjunct professors at California Western School of Law in San Diego, teach a course in consumer law. Above all, they stress that consignment agreements are contracts, and the consumer (consignor) should always request one in writing.

“I see no reason why enforcing a consignment agreement would be any more difficult than enforcing any other contract,” Hyde said.

They suggest a consignment agreement/contract clearly state: the business’ responsibility in case of damages to the goods or theft; the consignment shop’s fees or their percentage of the sale price; who pays for shipping and promotional responsibilities (where applicable); and that the product is returned to the consignor in the event of a bankruptcy or closure on the part of the consignment shop.

“If the company goes bankrupt, the effect, more times than not, (is that) the creditors of the consignment shop will take ownership of all the products (as collateral) and … and the consignor can be left in the cold because they did not have a secure debt,” Hyde said.

Though most reputable consignment shops have their own contract forms, Kazerounian urged, “Don’t always accept what the shop gives you, because everything is negotiable. There is nothing to say that a consumer cannot negotiate their own consignment contract.

“Maybe the shop won’t do business with you, but maybe there’s another consignment store where you can negotiate, and you can get the best bargain.”

Consignors may also visit the BBB’s website in advance to view a consignment shop’s rating or see if there are complaints filed with the BBB against it.

“We do have some that don’t have good grades,” San Diego BBB President and CEO Sheryl Reichert said. “We have some that are accredited (by the BBB), and if a consignment shop is accredited we will assist the consignor in a dispute resolution all the way through arbitration if necessary.”

When comparing consignment shops, Reichert said the BBB suggests asking how long the store has been in business and what their consignment terms are.

The more expensive an item is, the more thorough a contract should be — potentially requiring the services of an attorney to assure every ‘i’ is dotted and every ‘t’ crossed, Hyde said. Those who have a high-end good in dispute should contact an attorney for a free consultation, Hyde said. “Chances are they may take it on contingency,” he said. “Reputable attorneys offer a free consultation, and small claims court is always an option.”

According to San Diego Police officer Sophia Martinez with SDPD’s Department of Vice Permits and Licensing, shops selling tangible items (typically higher-end items or those with serial numbers such as precious gems, silver, gold and electronics — as opposed to clothes and books) are required to obtain a Secondhand Dealer license from the California Department of Justice (JUS-125).