45868 LIBLANG Chevrolet Automobile 2001 Litigating Rebuilt Wrecks2
User Manual: Chevrolet Automobile 2001
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The problem of ‘‘rebuilt wrecks’’ entering the stream of commerce unbeknownst to
innocent consumers has reached epidemic proportions.1This 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.4After a mandatory
inspection,5the vehicle may be sold under a salvage title and is eligible for highway use.
Consumer Law
By Dani K. Liblang
Litigating Rebuilt Wrecks
DE-STRESSING THE BUYER OF A DISTRESSED VEHICLE
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LITIGATING REBUILT WRECKS OCTOBER 2006
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MICHIGAN BAR JOURNAL
When the cost of repairs equals 91 percent or more of the pre-
damage value, the title must be surrendered and a ‘‘scrap’’ title ob-
tained.6A scrap vehicle is not eligible to be rebuilt or titled for high-
way 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, irre-
spective of the quality of its repair.8
State and Federal Odometer Statutes
State and federal laws require that a transferor provide the
buyer with an accurate odometer disclosure statement.9Federal
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 cir-
cumvent the odometer disclosure statutes to conceal the vehicle’s
true history.11
Civil remedies are the same under state and federal law, allow-
ing recovery of three times the actual damages or $1,500, which-
ever 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 pur-
chaser, regardless of privity.13
Motor Vehicle Code
While proof of intent to defraud is an essential element under the
odometer statutes, many MVC provisions create strict liability.
Under the MVC, dealers are prohibited from offering to sell a vehi-
cle unless the dealer has ‘‘in its immediate possession’’ a valid certifi-
cate of title.14 The title, including all reassignments, must be pre-
sented to the consumer at the time of sale.15 Copies of all documents
signed in connection with the sale must be given to the consumer at
the time of sale.16 When the seller
fails to comply with the MVC, the
buyer is entitled to void the sale and
recover all payments made, irrespec-
tive of the fact that the consumer
has had use of the vehicle.
Uniform Commercial
Code (UCC)
The sale of a rebuilt wreck often
gives rise to claims for breach of ex-
press warranty,17 breach of implied
warranty of merchantability,18 and
breach of warranty of title.19 Spe-
cific representations, such as the ve-
hicle having one owner or no acci-
dent damage, are express warranties,
inasmuch as such representations
describe the vehicle and become
part of the basis of the bargain.20
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 con-
tract description’’ and be ‘‘fit for the ordinary purposes for which
such goods are used.’’23 Obviously, a vehicle sold under an un-
branded 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 de-
fects, 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 ex-
press or implied,’’ such language is not sufficient to negate the
warranty of title.26
Remedies under the UCC can include damages, usually meas-
ured 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
Magnuson-Moss Warranty Act (MMWA)
The MMWA31 applies to claims for breach of express and im-
plied warranties arising under state law and to claims for revocation.
Additionally, when a dealer makes ‘‘any written warranty,’’ it is pro-
hibited from disclaiming or modifying ‘‘any implied warranty.’’32
While the specific issue of whether a certificate of title is a ‘‘writ-
ten warranty’’ under the MMWA has not been litigated, several
courts have held that other documents relating to the basis of the
bargain, such as an odometer statement or an inspection checklist,
constitute a ‘‘written warranty.’’33 Thus, selling a distressed vehicle
under an unbranded title may fall under the MMWA.
Further, it is well established that
breach of an implied warranty is ac-
tionable under the MMWA.34
In addition to damages, equitable
relief available under the MMWA
includes revocation, which may be
asserted against remote suppliers ir-
respective of state law privity rules.35
Finally, the MMWA provides for re-
covery of costs and attorney fees
based on ‘‘actual time expended.’’36
Motor Vehicle Service
and Repair Act (MVSRA)
The MVSRA37 prohibits unfair
or deceptive practices by motor vehi-
cle repair facilities. Among the pro-
hibited practices is replacing a part
with ‘‘one that lacks merchantability
FAST FACTS
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
‘‘certified pre-owned.’’
State and federal statutes provide remedies,
including revocation, treble damages, and attorney
fees, for consumers who purchase rebuilt wrecks that
have been sold without proper title and disclosure.
Many of the available remedies can be had
against not only the immediate seller, but also other
sellers in the chain of title who had a duty to obtain
a salvage or scrap title.
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MICHIGAN BAR JOURNAL
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OCTOBER 2006 LITIGATING REBUILT WRECKS
or fitness.’’38 Making negligent or substandard repairs is also action-
able under the MVSRA.39
A rebuilt wreck almost invariably provides an opportunity to
pursue the facility that put the vehicle back together. This is be-
cause 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 re-
cover damages (double damages in the case of a ‘‘willful and fla-
grant’’ 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 ‘‘trans-
action’’ between the parties. Further, insurance carriers who violate
the title statutes are not exempt, inasmuch as the so-called ‘‘insur-
ance 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 com-
mitted unfair or deceptive practices.
Damages under the MCPA include the consumer’s actual dam-
ages or $250, whichever is greater, plus reasonable costs and attor-
ney fees.44 ‘‘Actual damages’’ may include both economic and non-
economic damages.
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 opportu-
nity to provide relief to those harmed directly and to perform an im-
portant 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 vehi-
cle 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).
Dani K. Liblang of Liblang & Associates PC,
(http://www.lemonlawlawyers.com/) practices in the
areas of plaintiff’s personal injury, automobile war-
ranty litigation, and employment law. She is a mem-
ber of the National Association of Consumer Advo-
cates 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).
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.
