Raising Cane
By Rob Perez
Sunday, September 2, 2001
Yvonne Dang was surprised when she got a notice earlier this year that the loan payments on her company's 1998 Mercedes Benz were delinquent. Some customers are
alleging sneaky deals
at car dealershipsShe was surprised because she had traded in the car to Luxury Motors Ltd. late last year when purchasing another vehicle.
One condition of the deal was that Luxury Motors, which has since closed, would pay the $34,200 balance on the Mercedes loan.
Not only did Luxury Motors fail to pay the loan, it resold the vehicle without having title to the car, according to a lawsuit Dang and her company, Perfect Stone Inc., filed against the used-car dealership in February. Dang's is one of about half a dozen lawsuits filed in state court alleging that Luxury Motors sold used cars without having clear title to them.
Consumer attorneys say such a practice is common in Hawaii despite a state law prohibiting it. Some sales people are so anxious to close deals and boost profits that they sell used cars before the ownership papers are in order, the attorneys say.
Industry representatives, however, say the practice typically doesn't hurt customers and is done because the title-transfer process can take up to several months.
In the majority of cases, the process is completed with little or no snags in the ownership transfer. But in some transactions, especially those involving defective titles, serious problems can arise.
Consider the case of Frederick Orns, a Navy master diver who bought a 1994 Jeep Wrangler two years ago from a dealership run by Cutter Management Co., which oversees Hawaii's largest auto dealer operation.
Orns alleged in a June lawsuit that Cutter sold him and his wife the vehicle for $10,000 even though the dealership didn't have clear title to it. The car previously had been registered to an owner in California.
The couple also alleged that Cutter failed to tell them that the Jeep was a salvaged vehicle -- jargon for a car involved in a major accident, declared a total loss and then rebuilt. The lawsuit said Cutter deliberately concealed that information when preparing new title papers.
Attorney Jeff Portnoy, who is representing Cutter in the case, denied that the dealership withheld information about the salvaged title. He said the previous owner who traded the vehicle to Cutter duped the dealer by not disclosing the salvage history, and Cutter only learned of it after the sale to Orns and his wife.
Portnoy said Cutter offered to rescind the Orns' deal and give the couple a refund, but that offer was refused.
Portnoy also said car dealers in Hawaii commonly sell used cars without having clear title because getting the ownership transferred, especially for vehicles registered outside the state, can take long periods.
"Everybody does it," agreed Mike McKenna, a Windward Oahu auto dealer who acknowledged that the practice probably can be considered a violation of the state statute.
"There's no way around it," McKenna added. "If you didn't do it, you'd have to rent a huge football field to store these cars."
Getting the paperwork from lending institutions once the dealer pays off a loan on a trade-in and then getting the title transferred through the county's Department of Motor Vehicles can take up to several months because of backlogs, McKenna said.
"It's a major problem," he said. "It's something we wish we could address."
McKenna said dealers have been complaining to the county for years, but transfers still can take weeks. The county, however, says the problem isn't their fault. Title transfers typically take no more than four to five days, and dealers are allowed to get a limited number of same-day transfers from satellite city halls, said spokeswoman Carol Costa.
In California, selling used cars without clear title isn't a problem because dealers must post bonds specifically to protect consumers in case a title is subsequently discovered to be defective, according to McKenna, who owns dealerships there.
Hawaii has no similar protection, giving rise to cases like those of the Orns.
After experiencing a series of problems with the Jeep, including the hood suddenly opening and breaking the windshield while Orns was driving, the couple learned through an independent car-history service that the vehicle was issued a salvaged title in California in 1997, according to the lawsuit filed by the Bronster Crabtree & Hoshibata law firm. The Orns got the corrected title to the Jeep only a few months ago.
But because the Jeep didn't pass a safety inspection and the couple can't get the car's registration renewed, it sits at their home, neither legal nor safe to drive, according to the lawsuit.
Capt. Paulette Burton, chief of legal assistance at Schofield Barracks, the Central Oahu Army base, said she frequently advises soldiers who encounter problems with auto dealers over title issues. The problems aren't confined to small dealers but also involve major ones, she said.
In some cases, soldiers who traded in cars are called by dealers to say their financing fell through -- a tactic used to try to stick buyers with higher-priced loans, Burton said.
When the soldiers refuse the new financing and try to give back the newly purchased cars, they are told their trade-in vehicles already have been sold -- even though the titles hadn't been signed over to the dealers yet, she said.
"We don't know how they can do that," Burton said. "We have no clue."
McKenna criticized the practice. "If a dealer sells the trade-in (before the financing is cleared), he's crazy as hell to do it."
In some of the Luxury Motors lawsuits, the plaintiffs alleged that the dealership forged signatures to fraudulently transfer titles to unsuspecting buyers.
The state Department of Commerce and Consumer Affairs, which has 15 pending complaints against Luxury Motors, is investigating the company. An agency spokeswoman declined comment.
An attorney for Luxury Motors didn't return calls seeking comment.
Star-Bulletin columnist Rob Perez writes on issues
and events affecting Hawaii. Fax 529-4750, or write to
Honolulu Star-Bulletin, 500 Ala Moana Blvd., No. 7-210,
Honolulu 96813. He can also be reached
by e-mail at: rperez@starbulletin.com.
