Estate Jewelry Ownership: A Hot Issue

About five years ago, Cathy Calhoun, owner of Zenker Jewelers in Royersford, Pa., received a telephone call from a police officer. On a hunch, the officer was calling to ask if Calhoun had encountered a certain emerald and diamond bracelet. The bracelet had been stolen, and the police were trying to hunt down the jewelry and the thief.

“As he was describing it to me, I had it in my hand,” Calhoun recalls. The young woman who had sold her the bracelet had stolen it and some other items from her mother-in-law.

As an experienced estate jewelry dealer, Calhoun had developed a knack for recognizing suspicious situations, but nothing had seemed amiss about the woman’s stated reasons for selling the jewelry. “She told me she was going through a divorce, and it made perfect sense,” the jeweler says. “The girl was so nice, too.”

Calhoun was lucky: She was reimbursed for the money she had paid for the jewelry through a county victim-compensation fund. Most jewelers in such situations end up as losers two times over-the stolen jewelry is seized by law-enforcement authorities, and the money they paid for it is gone forever.

“It’s like throwing a hot potato,” says Melinda Adducci, partner and auctioneer at Joseph Du Mouchelle Fine and Estate Jewellers and Auctioneers in Grosse Pointe Farms, Mich. “If you’re the one who ends up with the hot potato, you may as well have written the check and thrown it out the window.”

Jewelers who sell a hot item could be sued for violating the Uniform Commercial Code, says Bill Hoefer of Hoefer’s Gemological Services, San Jose, Calif., who has done extensive research on legal issues involving jewelers. The UCC states that “there is in a contract for sale a warranty by the seller that the title conveyed shall be good, and its transfer rightful; and the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.”

Issues of title are not always clear-cut, warns John Kennedy, president of the Jewelers’ Security Alliance. “While there is a general rule that a thief can’t pass good title to an item, the subject is much more complex than that,” says Kennedy. “There can be murky fact patterns and disputes that confuse the issue. Furthermore, different states and jurisdictions have their own variations. Disputed ownership can easily result in expensive lawsuits.”

Among the “murky fact patterns” to which Kennedy alludes are the cases of relatives who have jointly inherited a piece of jewelry and former sweethearts who are quarreling over ownership of an item. Even though no jewel thief is involved in these situations, they could still result in a legal nightmare for a jeweler. Adducci recently accepted a ring on consignment from a woman but asked her to come back and retrieve it after receiving a fax from an attorney for the woman’s boyfriend, who contended that the boyfriend was the rightful owner. “We just didn’t want to have the problem,” Adducci says.

There are insurance implications, as well. Jewelers Mutual Insurance Co.’s Jewelers Block policy doesn’t cover “loss caused by order of any civil authority, including seizure, confiscation, or destruction of property.” Jewelers reporting a loss must send a statement to the insurance company that includes documentation of the jewelers’ “interest and the interest of all others in the property involved, including all mortgages and liens [and] changes in title of the property covered during the policy period,” the policy states. If the property in question turns out to have been stolen, “we would have no recourse other than to deny the claim,” says Bill Herrbold, vice president of claims at the Neenah, Wis., company.

Procedures protect you. Many jurisdictions require jewelers who buy estate jewelry to obtain a secondhand-dealer’s license and to follow certain procedures when buying from the public. Some retail jewelers don’t understand that they need a special license in order to buy secondhand jewelry, says David Rieger, executive vice president and chief operating officer of the New York-based Estate Jewelers Association of America (EJAA). “A lot of them are breaking the law, and they don’t even know it,” Rieger says. In some jurisdictions, the fingerprints of everyone on the jeweler’s staff who is involved in buying must be on file with local authorities.

Laws and regulations covering secondhand jewelry sales vary widely from state to state-and even between counties within the same state. Required procedures may include obtaining a valid driver’s license or passport from the seller, checking to ensure that the person’s name and address match those on the identification, fingerprinting the seller, keeping records of secondhand jewelry sales and copies of sellers’ identification, and transmitting records of jewelry sales to the police. Many jurisdictions also mandate that a jeweler hold the item for a specified period before doing anything with it.

“Those procedures usually scare away people who bring in something that has been stolen,” notes Adducci. Kennedy advises jewelers to check sellers’ identification and take their photographs, even if such practices are not required by law. “Even a fingerprint is not going too far,” he says.

In addition, many estate jewelers require sellers to sign a release certifying that they have title to the jewelry and will indemnify the jeweler from all claims by other parties to the item. “If the person resists signing the release, obviously there’s something funny there, and the jeweler should shy away from it,” says Joseph H. Samuel Jr., president of J.&S.S. DeYoung, a venerable estate jewelry firm in Boston.

If the seller has asked someone else to sell the jewelry on his or her behalf, it’s a good idea for the jeweler to request documentation of power of attorney, Adducci adds. Such situations commonly occur when an elderly person asks a younger relative for assistance in selling jewelry, she notes. If the item is accompanied by an appraisal or other paperwork, check that the name on the documents matches the seller’s identification, and obtain power-of-attorney certification if it doesn’t, Adducci recommends. She once encountered two women who told her they didn’t want a third person, who they said was their roommate, to know they were selling jewelry. “That makes you wonder why,” she says.

Even if the seller is a well-known, highly respected member of your community, it’s important to check identification-and to obtain a release and fingerprint, especially if these procedures are legally mandated, estate jewelry dealers warn. “If they have a problem with it, that should be a red flag,” says Rieger. “What do you have to hide if it’s yours to sell?”

Adducci recalls a situation in which she had to fingerprint a local detective who sold her a piece of jewelry. Because she was required to notify the police department of the sale, “everyone in his office knew he was selling the piece,” she says.

Adducci tells people in advance that she will have to take their fingerprints and notify the police of the sale. Although it can be embarrassing to fingerprint “a little old lady from Grosse Pointe Farms,” it’s possible to make the situation more comfortable for everyone by explaining that “you’re being asked by a higher authority to do it,” Adducci says. “Tell them that ‘this is the way we do it; there are no exceptions.'”

Recognizing suspicious situations. When you buy estate jewelry, it’s crucial to have confidence in the integrity of the seller-even more crucial than it is when you buy contemporary jewelry, JSA’s Kennedy notes. To minimize your chances of getting burned, “you should be buying only what you know”; stay away from goods or eras you’re not familiar with. “If you insist on buying what you don’t know, consult the experts,” Kennedy adds. Organizations such as EJAA, as well as gemological laboratories, can provide assistance. Experienced estate jewelry dealers have developed a “sixth sense” that enables them to recognize-and avoid-suspicious sellers. No matter how beautiful the piece may be, it’s best to decline it if the situation doesn’t seem right.

“When you’re on the other side of the desk, you can tell a lot of times by the body language,” Rieger says.

Calhoun always asks people why they’re selling the jewelry. “I shy away immediately if it seems to have to do with drugs,” she says. One key that something is amiss is nervousness, she notes. “They’ll change their story in two minutes. You get two different reasons for why they’re going to sell. They’ll talk too much, or they’ll move around a lot.”

“Be cautious of anyone who wants to sell immediately or who seems anxious,” Adducci advises. She often asks potential sellers, “What is your sense of urgency?” Most people say they need the money to pay bills or taxes, Adducci notes. “Less than 1% of people walk in and say, ‘I want the money today.'”

A seller’s insistence on being paid in cash is cause for concern, Samuel warns. “That’s an indication that there’s something funny-that the piece has been stolen and they don’t want a record,” he notes. Likewise, he adds, a jeweler should be suspicious of anyone who brings in a loose stone. “It raises a red flag; there should be some explanation of why it’s loose. I would ask, ‘Where is the mounting?'”

Ask the seller what price he or she hopes to obtain for the item. A ridiculously low figure could signify trouble. “Are they just trying to get rid of it or get it out of their hands?” Adducci asks. If so, the seller may be trying to unload a hot item or obtain money for drugs.

Assess the situation to determine whether it makes sense, Calhoun recommends. “If a very young person comes in to sell very old jewelry, it doesn’t look right to me. I just say, ‘I’m not interested,'” she says. Adducci suggests using the phrase, “We’re not buying at this time.”

It’s best to err on the side of caution if the situation makes you uneasy, industry veterans advise. Even if the potential seller is not a crook, your discomfort may indicate that a relationship with the person would not turn out to be beneficial to both parties. “If we have a problem with someone in the beginning, they’re probably going to be a problem later on,” Adducci says.