You may think that you sold your car when the buyer drives away, leaving you with the purchase price in hand. But if the new owner later gets into an auto accident and if you haven't properly recorded the sale with the Department of Motor Vehicles, you may find that you are still the legal owner and are responsible for some of the damages.
The 3rd District state Court of Appeal in Sacramento ruled in January that owners who fail to comply fully with the technical procedures for registering the transfer of a motor vehicle will still be considered owners of the automobile and may be held accountable for the negligent driving of the new owners.
The court said you can avoid this sort of ownership liability--for a car you don't really own--if you properly notify the Department of Motor Vehicles of the transfer or if you turn over both the registration card and ownership certificate to the buyer.
A state law says an owner of a motor vehicle is imputed with the negligence of a driver who is driving with the owner's express or implied permission. In other words, if you let someone drive your car, you will be held responsible for the death, personal injury or property damage caused by the driver's wrongful or careless driving.
In most routine circumstances, there is a limit on the amount you have to pay as the car's owner: $15,000 per person and $30,000 per accident for personal injuries and $5,000 for property damage.
There is no limit on liability for your own wrongful conduct, say, if you give the car keys to an obviously intoxicated person or someone who doesn't know how to drive.
In the Sacramento case, both the driver and his passenger were killed in August, 1981, when the driver's truck careened off the road and crashed. The driver had purchased the truck five months before the accident from a construction firm. The passenger's family sued the firm for wrongful death, alleging that it was still the legal owner of the truck.
A trial court dismissed the suit, but the Court of Appeal reversed the trial court's decision and ordered the case to proceed. This is not new law. There are other cases with the same holding, interpreting a provision in the state Vehicle Code, according to the construction firm's lawyer, William C. Livaich.
At the time of the sale of the truck, the ownership certificate--the pink slip--was endorsed by the construction company and given to the buyer. Ten days later, the company sent the registration card by certified mail to the new owner. But it never got there; it was returned to the sender.
State law requires that both the registration card and the ownership certificate be delivered to the buyer, who must then file them with the Department of Motor Vehicles.
When the accident occurred, the construction company still had possession of the registration card. The unsuccessful mailing did not comply with the letter of the law.
The Court of Appeal acknowledged that "at first blush" its decision seemed "harsh" but declared that it was the established public policy of California that "an injured person may disregard the (sale) if prior to the accident the parties to the sale have not complied with the pertinent provisions of the Vehicle Code."
The court noted that the company had an alternative method to escape liability. It could have filed a written notice of the sale with the Department of Motor Vehicles. The notice must include the date of sale, the name and address of the new and old owner and a description of the car on a form provided by the department.
Playing It Safe
To play it safe, when you sell a car, make sure you deliver--and that the buyer actually receives--both the pink slip, properly endorsed, and the registration card. Better yet, pick up the proper transfer notification form from the DMV, fill it out completely, accurately and legibly, then file it yourself.
If you fail to comply with these procedures, and the buyer of your car causes an accident, you could face liability up to $35,000 for personal injuries and property damage.
And your automobile insurance may not cover your loss. After all, once you sold the car, you probably had it removed from your insurance policy.