45868 LIBLANG Chevrolet Automobile 2001 Litigating Rebuilt Wrecks2

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Consumer Law

Litigating Rebuilt Wrecks

By Dani K. Liblang

DE-STRESSING THE BUYER OF A DISTRESSED VEHICLE

T

he problem of ‘‘rebuilt wrecks’’ entering the stream of commerce unbeknownst to
innocent consumers has reached epidemic proportions.1 This article will provide
an overview of the statutory remedies available to purchasers of rebuilt wrecks.
The legislative euphemism for rebuilt wreck is ‘‘distressed vehicle.’’ A ‘‘distressed
vehicle’’ is one so damaged that ‘‘the total estimated cost of repairs to rebuild . . .
the vehicle, including parts and labor, is equal to or exceeds 75 percent of the actual
cash value of the vehicle in its predamaged condition.’’2

The typical rebuilt wreck is a late-model, low-mileage vehicle that is represented to the
consumer as a ‘‘demo,’’ recent repossession, lease turn-in or, surprisingly, ‘‘certified
pre-owned.’’ Telltale signs of a rebuilt wreck include water leaks, excessive wind noise,
unusual tire wear, electrical problems, warning lights (e.g., airbags, ABS brakes, check
engine), or mechanical breakdowns that are unusual for the vehicle’s age and mileage.
A title history showing an insurance company, body shop, or salvage pool in the chain
of title also signals a likely rebuilt wreck.
Transfer of rebuilt wrecks is governed by Michigan’s Motor Vehicle Code (MVC).
The primary purpose of these statutes is to protect the public from ‘‘unscrupulous
dealers who would purchase extensively damaged automobiles, repair them, and then
sell them without informing the buyer that the vehicle was ‘rebuilt.’’’3
When the cost of repairs is equal to 75–90 percent of the pre-damage value, the
insurance carrier, dealer, owner, or other person acquiring title to the vehicle must
surrender title to the Secretary of State and obtain a ‘‘salvage’’ title.4 After a mandatory
inspection,5 the vehicle may be sold under a salvage title and is eligible for highway use.

28

State and Federal Odometer Statutes
State and federal laws require that a transferor provide the
buyer with an accurate odometer disclosure statement.9 Federal
law requires that the disclosure be made on the title in states,
such as Michigan, where the title contains a space provided for
that purpose.10
When it comes to rebuilt wrecks, many dealers deliberately circumvent the odometer disclosure statutes to conceal the vehicle’s
true history.11
Civil remedies are the same under state and federal law, allowing recovery of three times the actual damages or $1,500, whichever is greater, plus costs and reasonable attorney fees.12 Each
owner in the chain of title who fails to make proper disclosure
upon transfer of the title may be held liable to the ultimate purchaser, regardless of privity.13

Unless properly disclaimed,21 a warranty of merchantability is
implied with the sale of a vehicle by a dealer.22 To be merchantable,
the vehicle must ‘‘pass without objection in the trade under the contract description’’ and be ‘‘fit for the ordinary purposes for which
such goods are used.’’23 Obviously, a vehicle sold under an unbranded title would not ‘‘pass without objection’’ for that description
when, in fact, the vehicle was previously wrecked and should have
been branded as ‘‘salvage’’ or ‘‘scrap.’’ Further, many vehicles are not
reasonably fit for their intended purpose due to serious safety defects, such as missing or fake airbags, bent frames, and compromised
seatbelt systems.24
Every sale also includes, by operation of law, a warranty of
title.25 Unlike the implied warranty of merchantability, which
may be disclaimed by words such as ‘‘as is’’ or ‘‘no warranties express or implied,’’ such language is not sufficient to negate the
warranty of title.26
Remedies under the UCC can include damages, usually measured by the difference in value between the vehicle as represented
and the vehicle as delivered,27 revocation of acceptance,28 and
consequential and incidental damages,29 including attorney fees
and costs.30

L I T I G AT I N G R E B U I LT W R E C K S

When the cost of repairs equals 91 percent or more of the predamage value, the title must be surrendered and a ‘‘scrap’’ title obtained.6 A scrap vehicle is not eligible to be rebuilt or titled for highway use and cannot be sold or transferred to a retail purchaser.7
Insurance companies and body shops have an incentive to avoid
titles branding vehicles as ‘‘salvage’’ or ‘‘scrap’’ because a branded
title immediately devalues the vehicle by at least 50 percent, irrespective of the quality of its repair.8

Magnuson-Moss Warranty Act (MMWA)

OCTOBER 2006

The MMWA31 applies to claims for breach of express and implied warranties arising under state law and to claims for revocation.
Motor Vehicle Code
Additionally, when a dealer makes ‘‘any written warranty,’’ it is proWhile proof of intent to defraud is an essential element under the
hibited from disclaiming or modifying ‘‘any implied warranty.’’32
odometer statutes, many MVC provisions create strict liability.
While the specific issue of whether a certificate of title is a ‘‘writUnder the MVC, dealers are prohibited from offering to sell a vehiten warranty’’ under the MMWA has not been litigated, several
cle unless the dealer has ‘‘in its immediate possession’’ a valid certificourts have held that other documents relating to the basis of the
cate of title.14 The title, including all reassignments, must be prebargain, such as an odometer statement or an inspection checklist,
sented to the consumer at the time of sale.15 Copies of all documents
constitute a ‘‘written warranty.’’33 Thus, selling a distressed vehicle
signed in connection with the sale must be given to the consumer at
under an unbranded title may fall under the MMWA.
the time of sale.16 When the seller
Further, it is well established that
fails to comply with the MVC, the
breach of an implied warranty is acbuyer is entitled to void the sale and
tionable under the MMWA.34
recover all payments made, irrespecIn addition to damages, equitable
The typical ‘‘rebuilt wreck’’ is a late-model, lowtive of the fact that the consumer
relief available under the MMWA
mileage
vehicle
that
is
represented
to
the
consumer
has had use of the vehicle.
includes revocation, which may be
as a ‘‘demo,’’ recent repossession, lease turn-in, or
asserted against remote suppliers ir‘‘certified pre-owned.’’
Uniform Commercial
respective of state law privity rules.35
Code (UCC)
State and federal statutes provide remedies,
Finally, the MMWA provides for reThe sale of a rebuilt wreck often
including revocation, treble damages, and attorney
covery of costs and attorney fees
gives rise to claims for breach of exfees, for consumers who purchase rebuilt wrecks that
based on ‘‘actual time expended.’’36
press warranty,17 breach of implied
have been sold without proper title and disclosure.
warranty of merchantability,18 and
Many of the available remedies can be had
Motor Vehicle Service
breach of warranty of title.19 Speagainst
not
only
the
immediate
seller,
but
also
other
and Repair Act (MVSRA)
cific representations, such as the vesellers
in
the
chain
of
title
who
had
a
duty
to
obtain
hicle having one owner or no acciThe MVSRA37 prohibits unfair
a salvage or scrap title.
dent damage, are express warranties,
or deceptive practices by motor vehiinasmuch as such representations
cle repair facilities. Among the prodescribe the vehicle and become
hibited practices is replacing a part
part of the basis of the bargain.20
with ‘‘one that lacks merchantability

FAST FACTS

♦

MICHIGAN BAR JOURNAL

29

L I T I G AT I N G R E B U I LT W R E C K S
OCTOBER 2006

♦

MICHIGAN BAR JOURNAL

Telltale signs of a rebuilt wreck include
water leaks, excessive wind noise,
unusual tire wear, electrical problems,
warning lights, or mechanical breakdowns
that are unusual for the vehicle’s age
and mileage.
or fitness.’’38 Making negligent or substandard repairs is also actionable under the MVSRA.39
A rebuilt wreck almost invariably provides an opportunity to
pursue the facility that put the vehicle back together. This is because it would be highly unusual for an insurance company to
‘‘total’’ a vehicle that could be economically rebuilt. Thus, a dealer
hoping to make a profit is essentially forced to use substandard
parts and take other shortcuts to make the resale of the rebuilt
wreck economically feasible.
Privity is not required for claims under the MVSRA.40 A person
who is injured or damaged by a violation of the MVSRA may recover damages (double damages in the case of a ‘‘willful and flagrant’’ violation), plus reasonable attorney fees and costs.41

Michigan Consumer Protection Act (MCPA)
The MCPA42 prohibits unfair, conscionable, or deceptive acts as
defined in MCL 445.903(1). The wrongdoer need not be in privity
with the consumer, nor is the consumer required to show a ‘‘transaction’’ between the parties. Further, insurance carriers who violate
the title statutes are not exempt, inasmuch as the so-called ‘‘insurance exemption’’ applies only to acts or practices ‘‘made unlawful by
chapter 20 of the insurance code.’’43 Thus, an MCPA claim can
reach the direct seller and all others in the chain of title who committed unfair or deceptive practices.
Damages under the MCPA include the consumer’s actual damages or $250, whichever is greater, plus reasonable costs and attorney fees.44 ‘‘Actual damages’’ may include both economic and noneconomic damages.
Dani K. Liblang of Liblang & Associates PC,
(http://www.lemonlawlawyers.com/) practices in the
areas of plaintiff’s personal injury, automobile warranty litigation, and employment law. She is a member of the National Association of Consumer Advocates and was awarded its 2002 Consumer Hero
Award. She is also a contributor to Michigan Causes
of Action Formbook (ICLE 1996 & Supps) and
Torts: Michigan Law and Practice (ICLE 2d ed
2000 & Cum Supp).

30

Conclusion
The proliferation of rebuilt wrecks presents serious safety risks to
the motoring public, as well as significant economic harm to a broad
segment of our society. As consumer attorneys, we have an opportunity to provide relief to those harmed directly and to perform an important public service by deterring future misconduct while, at the
same time, obtaining just compensation for our efforts. ♦
Footnotes
1. ‘‘Special Report: Wrecks in Disguise,’’ Consumer Reports, January 2002,
pp 28–35.
2. MCL 257.12a.
3. Royal Auto Parts v State, 118 Mich App 284, 291, 324 NW2d 607, 610 (1982).
4. MCL 257.217c(2)(a)(ii); MCL 257.217c(4).
5. MCL 257.217c(12).
6. MCL 257.217c(2)(a)(ii); MCL 257.217c(4).
7. MCL 257.217c(2)(a)(ii).
8. ‘‘Special Report,’’ supra, p 31.
9. 49 USC 32705(a); MCL 257.233a.
10. 49 USC 32705(b)(1).
11. See Yazzie v Amigo Chevrolet, 189 F Supp 2d 1245 (D NM 2001).
12. 49 USC 31710(b); MCL 257.23a(15).
13. Rice v Gustavel, 891 F2d 594, 595 (CA 6, 1989).
14. MCL 257.235(1).
15. MCL 257.233a(3).
16. MCL 257.251a.
17. MCL 440.2313.
18. MCL 440.2314.
19. MCL 440.2312.
20. MCL 440.313(a) and (b).
21. MCL 440.2316; but see 15 USC 2308, prohibiting disclaimers when a vehicle is sold with a written warranty or service contract.
22. See MCL 440.2104(1), defining ‘‘merchant’’ as ‘‘a person who deals in goods
of the kind . . . involved in the transaction.’’
23. MCL 2.314(2)(a) and (c).
24. ‘‘Special Report,’’ supra, p 33.
25. MCL 440.2312.
26. MCL 440.2312, Official Comment 6.
27. MCL 440.2714(2).
28. MCL 440.2608.
29. MCL 440.2715.
30. MCL 440.2715(2).
31. 15 USC 2301, et seq.
32. 15 USC 2308(a) and (c).
33. See, e.g., Rice v Mike Ferrell Ford, Inc, 403 SE2d 774 (W Va 1991).
34. Computer Network, Inc v AM General Corp, 265 Mich App 309, 316, 696
NWS2d 49, 55 (2005).
35. 15 USC 2301(d)(1).
36. 15 USC 2310(d)(2).
37. MCL 257.1301, et seq.
38. Mich Admin Code, R 257.132(g).
39. Hengartner v Chet Sanson Sales, Inc, 132 Mich App 751, 755, 348 NW2d
15 (1984).
40. Id.
41. MCL 257.1336.
42. MCL 445.901, et seq.
43. MCL 445.904(3).
44. MCL 445.911(2).



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