Court Addresses Possible Owner's Liability For Vehicle Sellers Who Engage In Fraud

Dylan J. Church

In Rodgers v Champs Auto Sales, an unpublished opinion issued on January 20, 2022, the Michigan Court of Appeals addressed the question of whether ownership of a motor vehicle involved in an accident could be retroactively applied to the dealership that sold that vehicle if the sale was later voided on the basis of fraud. The Court of Appeals explained that a dealership could be relieved of liability under MCL 257.401 if it successfully transfers ownership to a buyer, but could be liable as an “owner” if the sale of a vehicle is determined to be void.

This case began on June 30, 2016, when Champs Auto Sales sold a 2005 Dodge Magnum to Donna Simmons and Tiffany Harris. All parties signed the purchase agreement and an application for Michigan title and registration was completed. Days later, Tiffany Harris was driving the vehicle and allegedly struck pedestrian Tyrone Rodgers as he was crossing the street.

At some point within the week following the accident, Donna Simmons was made aware of a possible odometer discrepancy discovered through a CARFAX report obtained by the company financing the vehicle. The vehicle mileage listed on the report was over 100,000 miles more than the number of miles reflected on the application for title when the vehicle was sold to Simmons and Harris. Approximately one week after the sale, Simmons returned the vehicle to Champs. While Champs denied tampering with the odometer, it did refund Simmons and retained possession of the vehicle. Champs had not yet filed the title application paperwork with the Secretary of State.

Rodgers brought suit against Champs under Michigan’s vehicle owner’s liability statute, specifically MCL 257.401(1), which states that the owner of a vehicle is liable for injuries caused through the negligent operation of that vehicle so long as the vehicle is being driven by someone with the owner’s express or implied consent. Champs filed a motion for summary disposition which was granted by the circuit court.

On appeal, Rodgers first argued that, because the application for title had not been filed with the State, Champs was still the owner of the vehicle at the time of his injury, and that Champs had consented to the vehicle being driven by Harris. The Court of Appeals rejected this argument due to Michigan Supreme Court precedent that vehicle ownership transfers at the moment of signing, without regard to when the document is delivered to the State. See Perry v Golling Chrysler Plymouth Jeep, Inc, 477 Mich 62, 64; 729 NW2d 500 (2007). However, the Court was quick to add that the transfer of ownership only occurs if the sale was valid. If the vehicle sale is considered void, ownership remains with the seller.

This served as the basis for Rodgers’ second argument: that a contract procured by fraud may be declared void ab initio by the defrauded party, such that the contract is considered to never have existed. According to Rodgers, this is what occurred when Simmons returned to the dealership to address the odometer discrepancy. Champs, on the other hand, argued that Simmons merely returned the vehicle for a refund, which was a permissible function—rather than a complete voiding—of the contract.

Viewed in the light most favorable to Rodgers, the Court found that sufficient evidence existed to create a question of fact as to whether the contract was voided and whether Champs, in turn, could be held liable for accident injuries as the vehicle’s owner. Consequently, the decision to grant Champs summary disposition from the case was reversed and the issue was remanded to the trial court.