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We have addressed the issue of salvage vehicles numerous times in the past. However, the incidence of salvage vehicles being sold unknowingly by new car dealers is increasing. As you know, every new car dealer will not retail a salvage vehicle without the proper disclosures to the customer, if they will retail the vehicle at all. The sale of a salvage vehicle is fraught with legal problems including breach of the Consumer Sales Practices Act, various other Ohio statutes, breach of contract, substantive rules and fraud. However, fly-by-night wholesalers and body shops are continually processing these vehicles and putting them into the stream of commerce. In Ohio, the sale of a reconstructed vehicle is not a crime, as long as the vehicle has been properly inspected, titled as "REBUILT SALVAGE" and all identification and VIN numbers on the vehicle match. See R.C. 4505.11(E) The problem occurs when a customer buys a salvage vehicle that has been in the stream of commerce and there is no corresponding salvage history available or branded title.
As relayed in past You Auto Knows®, the case of Hubbard v. Bob McDorman Chevrolet (1995), 104 Ohio App.3d 621, 662 N.E.2d 1102 specifically stated that the plaintiff had to prove that the dealership knew that the vehicle was salvage prior to selling it and deliberately failed to inform the Plaintiff of the history of the vehicle. The court noted that the title of the vehicle did not indicate salvage and the dealership specifically denied any prior knowledge of the vehicle's history. Therefore, unless the Plaintiff could establish that the dealership had some prior knowledge of the salvage history, the dealership could not be held responsible under the Ohio Consumer Sales Practices Act.
However, the Consumer Sales Practices Act specifically states that knowledge can be imputed from the facts. For example, if a dealer performs a 110-point safety inspection on the vehicle and discovers missing or mismatched identification numbers or other apparent signs of reconstruction, then the court could find that the dealership knew or should have known that something was wrong. In situations where reconstruction is suspected, the technician inspecting the vehicle should bring the problem to the attention of the used car manager, the service manager and/or the body shop manager for further inspection.
Although the CSPA indicates that knowledge is imputed from the facts, Ohio substantive Rule 109:4-3-16 "Advertisement in the sale of Motor Vehicles" at (B)(29) states that it is a deceptive and unfair act or practice in the sale of a motor vehicle to fail to disclose the fact that a vehicle was previously titled as a salvage vehicle if "the seller had actual knowledge of such fact." Again, this is in agreement with the Hubbard case.
However, Ohio title law, specifically R.C. 4505.181 at (B)(2) states that the retail purchaser has the absolute right to rescind the transaction and the dealer must refund the retail price to the consumer if the title to the vehicle indicates that it was a rebuilt salvage and the salvage history was not disclosed to the retail purchaser in writing, prior to the execution of the buyer's order.
Obviously, the problems occur when the title has been "washed" in several different states and ends up with a clean title in the state of Ohio. For example, if a California vehicle has been totaled but a disreputable body shop buys the wreck, reconstructs it, obtains a title in a foreign state, such as Oregon, and the vehicle is transferred to Michigan, Illinois and Ohio, the Ohio title will not be branded "salvage." This is a problem for the legitimate new car dealer which raises the following questions: Does the Ohio title have to indicate salvage or, is any salvage title in the chain of title, sufficient for rescission? Further, if the vehicle has a prior salvage history that is not reflected on the title, does the dealership violate R.C. 4505.181 if it sells the vehicle without disclosing its salvage history? If the dealership is unaware of the vehicle's prior history, then the dealership is as much a victim as the customer who purchased the vehicle. These are technicalities in the law that must be addressed. It must be noted that plaintiff's attorneys will obviously obtain an expert who will inspect the vehicle and claim that if the dealership had performed any type of inspection, it would have been abundantly clear that the vehicle had problems. Therefore, the dealership should have investigated the history of the vehicle to determine whether it had been salvage. Based upon this type of rationale, the courts are reluctant to throw these cases out. Further, since there is not a national title law which would protect not only consumers but new car dealers, there is very little that the dealership can do to protect itself against unscrupulous body shops, consumers and fly-by-night used car dealers.
The best course of action is for dealerships to perform either a Car Fax investigation (or similar service) and/or perform a thorough vehicle safety inspection. If Car Fax indicates that there is a problem, then obviously you will not retail the vehicle to one of your customers and you have immediate recourse against the individual who traded the vehicle in to you and/or the wholesaler who sold the vehicle to you. Again, if the vehicle inspection indicates that there may be a problem, the technician must bring this to the attention of the used car manager and the used car manager must determine whether or not to perform a more extensive investigation.
In many cases, the dealership has received a branded title and the dealership title clerk did not notify anyone. The dealership sells the car and the consumer files suit. In such cases, the dealership did have actual knowledge since it had a branded title. Therefore, make sure your dealership has policies in place to review titles and report any branded titles to a manager, including but not limited to, buy back titles. Naturally, in any litigation of this type, the dealership has recourse against anyone in the chain of title to determine who the "bad guy" is, unless there was title jumping involved. However, your best offense is not to sell the vehicle and to avoid litigation altogether.
As always, these are highlights of the law and are not to be construed as containing the entire law. This is not a legal opinion. If you have questions, please contact your attorney.
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