HOUSE BILL No. 4738 May 1, 1997, Introduced by Reps. Rhead, Alley, Perricone, Middaugh, Green, Palamara, Law and Griffin and referred to the Committee on Commerce. A bill to amend 1949 PA 300, entitled "Michigan vehicle code," by amending section 248 (MCL 257.248), as amended by 1993 PA 300, and by adding sections 1d, 1e, and 4c. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 SEC. 1D. "AUCTION" MEANS THE SALE OF A MOTOR VEHICLE BY A 2 DEALER AT WHOLESALE FOR THE HIGHEST BID. AUCTION DOES NOT 3 INCLUDE THE SALE OF A VEHICLE THAT IS TITLED IN THE NAME OF A 4 MANUFACTURER BY THE MANUFACTURER OR A SUBSIDIARY OF THE MANUFAC- 5 TURER TO A DEALER. 6 SEC. 1E. "AUCTION DEALER" MEANS A PERSON WHO CONDUCTS A 7 PRIVATE OR PUBLIC AUCTION FOR A FEE OR OTHER VALUABLE CONSIDERA- 8 TION FROM EITHER THE BUYER OR SELLER, OR BOTH, OF MOTOR VEHICLES 9 IN WHICH THAT PERSON DOES NOT HAVE TITLE OR ANY OTHER LEGAL 10 INTEREST. 02922'97 JJG 2 1 SEC. 4C. "BROKER" MEANS A PERSON, OTHER THAN A DEALER OR AN 2 EMPLOYEE OR AGENT OF A DEALER, WHO FOR A FEE OR OTHER VALUABLE 3 CONSIDERATION, BRINGS A BUYER AND A SELLER OF A MOTOR VEHICLE 4 TOGETHER. 5 Sec. 248. (1)A person shall not carry on or conduct the6business of buying, selling, brokering, or dealing in vehicles of7a type required to be titled under this act unless the person8obtains a dealer license from the secretary of state authorizing9the carrying on or conducting of that business. Until July 1,101994, a person shall not carry on or conduct the business of11buying, selling, brokering, or dealing in distressed, late model12motor vehicles or salvageable parts unless the person obtains a13used or secondhand vehicle parts dealer license from the secre-14tary of state or is an insurance company admitted to conduct15business in this state, except that a motor vehicle repair facil-16ity registered under the motor vehicle service and repair act,17Act No. 300 of the Public Acts of 1974, being sections 257.130118to 257.1340 of the Michigan Compiled Laws, may purchase salvagea-19ble parts and salvage vehicles for the purposes of using acquired20parts and vehicles in the repair of other vehicles. A person21shall not carry on or conduct the business of buying vehicles to22process into scrap metal or store or display vehicles as an agent23or escrow agent of an insurance company unless the person obtains24a dealer license from the secretary of state. A vehicle scrap25metal processor who does not purchase vehicles from unlicensed26persons is not required to obtain a dealer license. Until July271, 1994, a person from another state shall not purchase, sell, or02922'97 3 1otherwise deal in distressed, late model motor vehicles or2salvageable parts unless the person obtains a foreign salvage3vehicle dealer license from the secretary of state as prescribed4under section 248b. The secretary of state shall investigate and5seek prosecution, if necessary, of persons allegedly conducting a6business without a license. This subsection applies until July71, 1994.A PERSON SHALL NOT BUY, SELL, EXCHANGE, AUCTION, OR 8 DEAL IN VEHICLES OF A TYPE REQUIRED TO BE TITLED UNDER THIS ACT 9 UNLESS THE PERSON OBTAINS A DEALER LICENSE FROM THE SECRETARY OF 10 STATE AUTHORIZING ACTIVITY OR UNLESS THE PERSON IS EMPLOYED BY A 11 LICENSED DEALER, OR UNLESS THE PERSON IS INVOLVED IN WHOLESALE 12 TRANSACTIONS BETWEEN 2 LICENSED DEALERS. A PERSON SHALL NOT 13 BROKER MOTOR VEHICLES EXCEPT THROUGH AN AUCTION DEALER. A PERSON 14 SHALL NOT BUY, SELL, EXCHANGE, AUCTION, OR DEAL IN DISTRESSED 15 LATE MODEL VEHICLES OR SALVAGEABLE PARTS UNLESS THE PERSON 16 OBTAINS A USED OR SECONDHAND VEHICLE PARTS DEALER LICENSE, AN 17 AUTOMOTIVE RECYCLER LICENSE, OR A SALVAGE POOL LICENSE FROM THE 18 SECRETARY OF STATE OR IS AN INSURANCE COMPANY AUTHORIZED TO CON- 19 DUCT BUSINESS IN THIS STATE. A PERSON SHALL NOT BUY VEHICLES TO 20 PROCESS INTO SCRAP METAL OR STORE OR DISPLAY VEHICLES AS AN AGENT 21 OR ESCROW AGENT OF AN INSURANCE COMPANY, UNLESS THE PERSON 22 OBTAINS A DEALER LICENSE FROM THE SECRETARY OF STATE. A VEHICLE 23 SCRAP METAL PROCESSOR WHO DOES NOT PURCHASE VEHICLES OR SALVAGEA- 24 BLE PARTS FROM UNLICENSED PERSONS IS NOT REQUIRED TO OBTAIN A 25 DEALER LICENSE. A PERSON FROM ANOTHER STATE SHALL NOT PURCHASE, 26 SELL, OR OTHERWISE DEAL IN DISTRESSED, LATE MODEL VEHICLES OR 27 SALVAGEABLE PARTS UNLESS THE PERSON OBTAINS A FOREIGN SALVAGE 02922'97 4 1 VEHICLE DEALER LICENSE FROM THE SECRETARY OF STATE AS PRESCRIBED 2 UNDER SECTION 248B. A PERSON, INCLUDING A DEALER, SHALL NOT PUR- 3 CHASE OR ACQUIRE A DISTRESSED, LATE MODEL VEHICLE OR A SALVAGEA- 4 BLE PART THROUGH A SALVAGE POOL, AUCTION, OR BROKER WITHOUT A 5 LICENSE AS A SALVAGE VEHICLE AGENT. THE SECRETARY OF STATE SHALL 6 INVESTIGATE AND SEEK PROSECUTION, IF NECESSARY, OF PERSONS 7 ALLEGEDLY CONDUCTING WITHOUT A LICENSE A BUSINESS REQUIRED TO BE 8 LICENSED UNDER THIS SUBSECTION. 9 (2)The application for a dealer license shall be in the10form prescribed by the secretary of state and shall be signed by11the applicant. In addition to other information as may be12required by the secretary of state, the application shall include13all of the following:14(a) Name of applicant.15(b) Location of applicant's established place of business in16this state.17(c) The name under which business is to be conducted.18(d) If the business is a corporation, the state of19incorporation.20(e) Name and address of each owner or partner and, if a cor-21poration, the name of the principal officers.22(f) The county in which the business is to be conducted and23the address of each place of business in that county.24(g) If new vehicles are to be sold, the make to be handled.25Each new vehicle dealer shall send with the application for26license a certification that the dealer holds a bona fide27contract to act as factory representative, factory distributor,02922'97 5 1or distributor representative to sell at retail the make of2vehicle to be sold.3(h) A statement of the previous history, record, and associ-4ations of the applicant and of each owner, partner, officer, and5director, which statement shall be sufficient to establish to the6satisfaction of the secretary of state the business reputation7and character of the applicant.8(i) A statement showing whether the applicant has previously9applied for a license, the result of the application, and whether10the applicant has ever been the holder of a dealer license which11was revoked or suspended.12(j) If the applicant is a corporation or partnership, a13statement showing whether a partner, employee, officer, or direc-14tor has been refused a license or has been the holder of a15license which was revoked or suspended.16(k) Until July 1, 1994, if the application is for a used or17secondhand vehicle parts dealer, all of the following:18(i) Evidence that the applicant maintains or will maintain19an established place of business.20(ii) Evidence that the applicant maintains or will maintain21a police book and vehicle parts purchase and sales records as22required under this act.23(iii) Evidence of workers' compensation insurance coverage24for employees classified under the standard industrial classifi-25cation number 4015, entitled "motor vehicle parts -- used" or26under the national council on compensation insurance code number273821, entitled "automobile dismantling", if applicable.THE 02922'97 6 1 APPLICATION FOR A DEALER LICENSE SHALL BE IN THE FORM PRESCRIBED 2 BY THE SECRETARY OF STATE AND SHALL BE SIGNED BY THE APPLICANT. 3 IN ADDITION TO OTHER INFORMATION REQUIRED BY THE SECRETARY OF 4 STATE, THE APPLICATION SHALL INCLUDE ALL OF THE FOLLOWING: 5 (A) NAME OF APPLICANT. 6 (B) LOCATION OF APPLICANT'S ESTABLISHED PLACE OF BUSINESS IN 7 THIS STATE. 8 (C) THE NAME UNDER WHICH BUSINESS IS TO BE CONDUCTED. 9 (D) IF THE BUSINESS IS A CORPORATION, THE STATE OF 10 INCORPORATION. 11 (E) NAME, ADDRESS, DATE OF BIRTH, AND SOCIAL SECURITY NUMBER 12 OF EACH OWNER OR PARTNER AND, IF A CORPORATION, THE NAME, 13 ADDRESS, DATE OF BIRTH, AND SOCIAL SECURITY NUMBERS OF EACH PRIN- 14 CIPAL OFFICER. 15 (F) THE COUNTY IN WHICH THE BUSINESS IS TO BE CONDUCTED AND 16 THE ADDRESS OF EACH PLACE OF BUSINESS IN THAT COUNTY. 17 (G) IF NEW VEHICLES ARE TO BE SOLD, THE MAKE OF THE NEW 18 VEHICLES. EACH NEW VEHICLE DEALER SHALL SEND WITH THE APPLICA- 19 TION FOR LICENSE A CERTIFICATION THAT THE DEALER HOLDS A BONA 20 FIDE CONTRACT TO ACT AS FACTORY REPRESENTATIVE, FACTORY DISTRIBU- 21 TOR, OR DISTRIBUTOR REPRESENTATIVE TO SELL AT RETAIL THE MAKE OF 22 VEHICLE TO BE SOLD. 23 (H) A STATEMENT OF THE PREVIOUS HISTORY, RECORD, AND ASSOCI- 24 ATIONS OF THE APPLICANT AND OF EACH OWNER, PARTNER, OFFICER, AND 25 DIRECTOR. THE STATEMENT SHALL BE SUFFICIENT TO ESTABLISH TO THE 26 SATISFACTION OF THE SECRETARY OF STATE THE BUSINESS REPUTATION 27 AND CHARACTER OF THE APPLICANT. 02922'97 7 1 (I) A STATEMENT SHOWING WHETHER THE APPLICANT HAS PREVIOUSLY 2 APPLIED FOR A LICENSE, THE RESULT OF THE APPLICATION, AND WHETHER 3 THE APPLICANT HAS EVER BEEN THE HOLDER OF A DEALER LICENSE THAT 4 WAS REVOKED OR SUSPENDED. 5 (J) IF THE APPLICANT IS A CORPORATION OR PARTNERSHIP, A 6 STATEMENT SHOWING WHETHER A PARTNER, EMPLOYEE, OFFICER, OR DIREC- 7 TOR HAS BEEN REFUSED A LICENSE OR HAS BEEN THE HOLDER OF A 8 LICENSE THAT WAS REVOKED OR SUSPENDED. 9 (K) IF THE APPLICATION IS FOR A USED OR SECONDHAND VEHICLE 10 PARTS DEALER OR AN AUTOMOTIVE RECYCLER, ALL OF THE FOLLOWING: 11 (i) EVIDENCE THAT THE APPLICANT MAINTAINS OR WILL MAINTAIN 12 AN ESTABLISHED PLACE OF BUSINESS. 13 (ii) EVIDENCE THAT THE APPLICANT MAINTAINS OR WILL MAINTAIN 14 A POLICE BOOK AND VEHICLE PARTS PURCHASE AND SALES RECORDS AS 15 REQUIRED UNDER THIS ACT. 16 (iii) IF APPLICABLE, EVIDENCE OF WORKER'S COMPENSATION 17 INSURANCE COVERAGE FOR EMPLOYEES CLASSIFIED UNDER THE STANDARD 18 INDUSTRIAL CLASSIFICATION NUMBER 4015, ENTITLED "MOTOR VEHICLE 19 PARTS -- USED" OR UNDER THE NATIONAL COUNCIL ON COMPENSATION 20 INSURANCE CODE NUMBER 3821, ENTITLED "AUTOMOBILE DISMANTLING". 21 (l) CERTIFICATION THAT THE APPLICANT OR ANOTHER PERSON NAMED 22 ON THE APPLICATION IS NOT ACTING ON BEHALF OF ANY OTHER PERSON IN 23 SEEKING THE LICENSE. 24 (M) A STATEMENT THAT SAYS: "A PERSON SHALL NOT BROKER A 25 MOTOR VEHICLE EXCEPT THROUGH AN AUCTION." 26 (3)A person shall make a separate application for a dealer27license for each county in which business is to be conducted, and02922'97 8 1a dealer, before moving 1 or more of his or her places of2business or opening an additional place of business, shall apply3to the secretary of state for and obtain a supplemental dealer4license for which a fee shall not be charged. The dealer license5entitles the dealer to conduct in the county covered by the6license the business of buying, selling, and dealing in7vehicles. This subsection does not apply to a person licensed as8a foreign salvage vehicle dealer under section 248b. This sub-9section applies until July 1, 1994.A PERSON SHALL MAKE A SEPA- 10 RATE APPLICATION FOR A DEALER LICENSE FOR EACH COUNTY IN WHICH 11 BUSINESS IS TO BE CONDUCTED. BEFORE MOVING 1 OR MORE PLACES OF 12 BUSINESS, OR OPENING AN ADDITIONAL PLACE OF BUSINESS, A DEALER 13 SHALL APPLY TO THE SECRETARY OF STATE FOR AND OBTAIN A SUPPLEMEN- 14 TAL DEALER LICENSE. A FEE SHALL NOT BE CHARGED FOR A SUPPLEMEN- 15 TAL DEALER LICENSE. THE DEALER LICENSE ENTITLES THE DEALER TO 16 BUY, SELL, AND DEAL IN VEHICLES OR SALVAGEABLE PARTS. THIS SUB- 17 SECTION DOES NOT APPLY TO A PERSON LICENSED AS A FOREIGN SALVAGE 18 VEHICLE DEALER UNDER SECTION 248B. 19 (4) The secretary of state may divide the calendar year into 20 quarters and the total number of dealer licensees into approxi- 21 mately convenient quarter segments. Each dealer license granted 22 under subsection (1) shall expire on the last day of the month 23in the quarter for the business year1 YEAR AFTER THE MONTH in 24 which the license was issued and may be renewed upon application 25 and payment of the fee required by section 807. 26 (5)AEXCEPT FOR A LICENSE RENEWAL, A license shall not be 27 granted until an investigation is made of the applicant's 02922'97 9 1 qualifications under this act., except that this subsection2does not apply to license renewals.The secretary of state shall 3 make AND COMPLETE the investigationwithinNOT MORE THAN 15 4 days after receiving the application and SHALL make a reporton5 OF the investigation. 6(6) This subsection applies until July 1, 1994. The secre-7tary of state shall classify and differentiate vehicle dealers8according to the type of activity they perform. A dealer shall9not engage in activities of a particular classification as pro-10vided in this act unless the dealer is licensed in that11classification. An applicant may apply for a dealer license in 112or more of the following classifications:13(a) New vehicle dealer.14(b) Used or secondhand vehicle dealer.15(c) Used or secondhand vehicle parts dealer.16(d) Vehicle scrap metal processor.17(e) Vehicle salvage pool operator.18(f) Distressed vehicle transporter.19(g) Broker.20(h) Until July 1, 1994, a foreign salvage vehicle dealer.21 (6)(7)An applicant for a new vehicle dealer LICENSE, or 22 a used or secondhand vehicle dealer LICENSE, orbrokerAN AUC- 23 TION DEALER license shallaccompany the application with24 PROVIDE a properly executed bond or renewal certificate WITH THE 25 APPLICATION. If a renewal certificate is used, the bondshall26beIS considered as renewed for each succeeding year in the same 27 amount and with the same effect as an original bond. The bond 02922'97 10 1 shall be in the sum of $10,000.00 withgood and sufficientA 2 surety to be approved by the secretary of state. The bond shall 3 be conditioned to indemnify or reimburse a purchaser, seller, 4 financing agency, or governmental agency for monetary loss caused 5 through fraud, cheating, or misrepresentation in the conduct of 6 the vehicle business whether the fraud, cheating, or misrepresen- 7 tation was made by the dealer or by an employee, agent, or sales- 8 person of the dealer. The surety is required to make indemnifi- 9 cation or reimbursement for a monetary loss only after judgment 10 based on fraud, cheating, or misrepresentation has been entered 11 in a court of record against the licensee. The bond shall also 12 be conditioned to indemnify or reimburse the state for any sales 13 tax deficiency as provided in the general sales tax act,Act14No. 167 of the Public Acts of 1933, as amended, being sections15205.51 to 205.78 of the Michigan Compiled Laws1933 PA 167, 16 MCL 205.51 TO 205.78, or use tax deficiency as provided in the 17 use tax act,Act No. 94 of the Public Acts of 1937, as amended,18being sections 205.91 to 205.111 of the Michigan Compiled Laws19 1937 PA 94, MCL 205.91 TO 205.111, for the year in which the bond 20 was in force. The surety is required to make indemnification or 21 reimbursement only after final judgment has been entered in a 22 court of record against the licensee. A dealer or applicant who 23 has furnished satisfactory proof that a bond similar to the bond 24 required by this subsection is executed and in force is exempt 25 from the bond provisions set forth in this subsection. The 26 aggregate liability of the surety shall not exceed the sum of the 27 bond. The surety on the bond may cancel the bond upon giving 30 02922'97 11 1 days' notice in writing to the secretary of state.and2thereafterTHE SURETY is not liable for a breach of condition 3 occurring after the effective date of the cancellation. 4 (7)(8)An applicant for A LICENSE AS a new vehicle dealer 5 or a used or secondhand vehicle dealerlicenseshallaccompany6the application with an applicationALSO APPLY for not less than 7 2 dealer plates as provided by section 245, accompanied by the 8 proper fee as provided by section 803. 9 (8)(9) A dealer required to be licensed under this sec-10tion, as a condition precedent to the granting of a license,11shall file with the secretary of state an irrevocable written12stipulation, authenticated by the applicant, stipulating and13agreeing that legal process affecting the dealer, served on the14secretary of state or a deputy of the secretary of state, has the15same effect as if personally served on the dealer. This appoint-16ment remains in force as long as any liability of the dealer17remains outstanding within this state.BEFORE A DEALER REQUIRED 18 TO BE LICENSED UNDER THIS SECTION IS GRANTED A LICENSE, HE OR SHE 19 SHALL STIPULATE IN WRITING THAT SUBSTITUTED SERVICE OF LEGAL PRO- 20 CESS MAY BE SERVED UPON THE SECRETARY OF STATE OR A DEPUTY OF THE 21 SECRETARY OF STATE. THE STIPULATION SHALL REMAIN IN FORCE IF THE 22 DEALER HAS ANY LIABILITY IN THIS STATE. 23(10) A person shall not carry on or conduct the business of24buying, selling, brokering, or dealing in vehicles of a type25required to be titled under this act unless the person obtains a26dealer license from the secretary of state authorizing the27carrying on or conducting of that business. A person shall not02922'97 12 1carry on or conduct the business of buying, selling, brokering,2or dealing in distressed, late model vehicles or salvageable3parts unless the person obtains a used or secondhand vehicle4parts dealer, an automotive recycler, or a salvage pool license5from the secretary of state or is an insurance company admitted6to conduct business in this state. A person shall not carry on7or conduct the business of buying vehicles to process into scrap8metal or store or display vehicles as an agent or escrow agent of9an insurance company, unless the person obtains a dealer license10from the secretary of state. A vehicle scrap metal processor who11does not purchase vehicles or salvageable parts from unlicensed12persons shall not be required to obtain a dealer license. A13person from another state shall not purchase, sell, or otherwise14deal in distressed, late model vehicles or salvageable parts15unless the person obtains a foreign salvage vehicle dealer16license from the secretary of state as prescribed under17section 248b. A person, including a dealer, shall not purchase18or acquire a distressed, late model vehicle or a salvageable part19through a salvage pool, auction, or broker without a license as a20salvage vehicle agent. The secretary of state shall investigate21and seek prosecution, if necessary, of persons allegedly conduct-22ing a business without a license. This subsection applies on and23after July 1, 1994.24(11) This subsection applies on and after July 1, 1994. The25application for a dealer license shall be in the form prescribed26by the secretary of state and shall be signed by the applicant.27In addition to other information as may be required by the02922'97 13 1secretary of state, the application shall include all of the2following:3(a) Name of applicant.4(b) Location of applicant's established place of business in5this state.6(c) The name under which business is to be conducted.7(d) If the business is a corporation, the state of8incorporation.9(e) Name, address, date of birth, and social security number10of each owner or partner and, if a corporation, the name,11address, date of birth, and social security numbers of each of12the principal officers.13(f) The county in which the business is to be conducted and14the address of each place of business in that county.15(g) If new vehicles are to be sold, the make to be handled.16Each new vehicle dealer shall send with the application for17license a certification that the dealer holds a bona fide con-18tract to act as factory representative, factory distributor, or19distributor representative to sell at retail ......... (the make20of vehicle to be sold).21(h) A statement of the previous history, record, and associ-22ations of the applicant and of each owner, partner, officer, and23director, which statement shall be sufficient to establish to the24satisfaction of the secretary of state the business reputation25and character of the applicant.26(i) A statement showing whether the applicant has previously27applied for a license, the result of the application, and whether02922'97 14 1the applicant has ever been the holder of a dealer license which2was revoked or suspended.3(j) If the applicant is a corporation or partnership, a4statement showing whether a partner, employee, officer, or direc-5tor has been refused a license or has been the holder of a6license which was revoked or suspended.7(k) If the application is for a used or secondhand vehicle8parts dealer or an automotive recycler, all of the following:9(i) Evidence that the applicant maintains or will maintain10an established place of business.11(ii) Evidence that the applicant maintains or will maintain12a police book and vehicle parts purchase and sales records as13required under this act.14(iii) Evidence of worker's compensation insurance coverage15for employees classified under the standard industrial classifi-16cation number 4015, entitled "motor vehicle parts -- used" or17under the national council on compensation insurance code number183821, entitled "automobile dismantling", if applicable.19(l) Certification that neither the applicant nor another20person named on the application is acting as the alter ego or in21the place of or on behalf of any other person or persons in seek-22ing the license. For the purpose of this subdivision, "alter23ego" means a person who acts for and on behalf of, or in the24place of, another person for purposes of obtaining a vehicle25dealer license.26(12) This subsection applies on and after July 1, 1994. A27person shall make a separate application for a dealer license for02922'97 15 1each county in which business is to be conducted and a dealer,2before moving 1 or more of his or her places of business, or3opening an additional place of business, shall apply to the sec-4retary of state for and obtain a supplemental dealer license, for5which a fee shall not be charged. The dealer license shall enti-6tle the dealer to conduct in the county covered by the license7the business of buying, selling, and dealing in vehicles or sal-8vageable parts. This subsection shall not apply to a person9licensed as a foreign salvage vehicle dealer under section 248b.10 (9)(13) This subsection applies on and after July 1,111994.The secretary of state shall classifyand differentiate12 vehicle dealers according to the type of activity they perform. 13 A dealer shall not engage in activities of a particular classifi- 14 cation as provided in thisactSUBSECTION unless the dealer is 15 licensed in that classification. An applicant may apply for a 16 dealer license in 1 or more of the following classifications: 17 (a) New vehicle dealer. 18 (b) Used or secondhand vehicle dealer. 19 (c) Used or secondhand vehicle parts dealer. 20 (d) Vehicle scrap metal processor. 21 (e) Vehicle salvage pool operator. 22 (f) Distressed vehicle transporter. 23 (g)Broker.AUCTION DEALER. 24 (h) Foreign salvage vehicle dealer. 25 (i) Automotive recycler. 02922'97 Final page. JJG