November 14, 2015 • By Dennis Beaver

Today’s story will be important to anyone who has recently opened or is considering starting their own auto repair shop, including: collision repairs, brakes, tire service, tune-ups, painting and car stereo.

It’s possible — and entirely preventable — to do a great job and then wind up being out thousands of dollars, as Sacramento reader, “Alex” discovered. His email — and the reason for contacting You and the Law — could be summed up in the two shortcomings which can harm any company:

  • Being overly trusting of your customers, and;
  • A failure to understand laws which apply to your business.

“We install high-end automotive audio systems which, at a minimum, run about $5,000. Our specialty paint department does terrific, creative work which can easily exceed $7,500. When a vehicle leaves our shop, it takes with it the pride, heart and soul of our staff who are skilled technicians and artists, all of us passionate about cars.”

Alex described a “Trusting, handshake philosophy, which leads to a great deal of repeat business. Deposits are never required, as we do not release a vehicle until paid. Rarely, have I’ve filed a garageman’s lien with DMV, which always resulted in payment.”

We would quickly learn that the answer to our question, “So, Alex, what’s the problem?” meant that he was going to be out thousands of dollars due to misplaced trust in one of his “repeat, good customers who buy and sell used, high-end cars, fixing them up with our audio systems and custom paint jobs.”

“David brought in a Corvette, and we did a $7500 paint job. But he vanished and the car has been here for two months. He does not reply to voice mail, email, and our bills have been returned by the post office.”

Alex did file a lien — the first step for an auction sale — but within days, our reader would discover a huge and now costly mistake that he had been making for years.

“I received a Declaration in Opposition to Lien Sale from DMV, and the same day, a phone call from a credit union representative, claiming they were the legal owner of the Corvette, and insisting, not only that it be released to them, but that their payment obligations are limited.”

“David was a good customer. I trusted him. Can the credit union force me to give them the car and not pay the entire amount due? What’s going on?” my angry and terribly frustrated reader asked.

Can the credit union require that Alex hand them the Corvette for only a portion of the amount due? Yes!

Civil code section 3068 limits the amount a legal owner has to pay for work or services on a vehicle to $1500 and further limits storage costs. In California, Alex committed what is called a “Civil Code Section 3068,” violation, and all states have similar laws.

“It’s because of something your reader unfortunately failed to do, that the credit union can recover the car with only paying a limited amount, we learned from Los Angeles based attorney, Jennifer Smith who “sees cases like this at least twice a week.” She outlined how this happens:

“In the typical 3068 situation, a car is brought in for, let’s say, transmission work or to a body shop for repairs after an accident. While the shop owner may have a signed repair order, no down payment nor a credit card authorization is obtained. After the job is completed, they try to contact the customer, but days, weeks and sometimes months go by, and just like with your reader, no one returns.

“The shop then will file a lien sale notice with DMV who in turn notifies lienholders —  anyone who has a legal interest in the car such as the credit union or bank — and they have ten days in which to oppose the sale,” she points out.

“What Alex and so many repair shops fail to do is obtain consent of the legal owner of the vehicle when substantial amounts of work are going to be done to the car,” Smith points out.

“You do this by looking at the car’s registration, which should list the legal owner, and a shop can request a Commercial Requester Account with DMV, which will give them the ability to discover who the legal owners are.

“Some shops will contact lienholders and ask for written consent. If obtained, only then is the legal owner responsible for the full bill. If not, the legal owner’s liability is limited by statute to $1,500,” she concluded.

Moral to the story: Know the laws which apply to your business.

Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.