44-20-112. Bond of licensee.
Statute text
(1) Before any motor vehicle dealer's, wholesaler's, wholesale motor vehicle auction dealer's, business disposal, or used motor vehicle dealer's license is issued by the board through the executive director to an applicant, the applicant must procure and file with the board evidence of a savings account, deposit, or certificate of deposit meeting the requirements of section 11-35-101 or a good and sufficient bond with corporate surety duly licensed to do business within the state, approved as to form by the attorney general of the state, and conditioned that the applicant must not practice fraud or violate any provision of this part 1 related to fraud that is designated by the board by rule in conducting the business for which the applicant is licensed. A motor vehicle dealer, business disposer, or used motor vehicle dealer need not furnish an additional bond, savings account, deposit, or certificate of deposit under this section if the dealer furnishes a bond, savings account, deposit, or certificate of deposit under section 44-20-412.
(2) (a) The purpose of the bond procured by the applicant in accordance with subsection (1) of this section and section 44-20-114 (1) is to provide for the reimbursement for any loss or damage suffered by any retail consumer caused by fraud or a violation of this part 1 related to fraud by a motor vehicle dealer, used motor vehicle dealer, wholesale motor vehicle auction dealer, business disposer, or wholesaler. For a wholesale transaction, the bond is available to each party to the transaction; except that, if a retail consumer is involved, the consumer has priority to recover from the bond. The amount of the bond must be fifty thousand dollars for a motor vehicle dealer applicant, used motor vehicle dealer applicant, wholesale motor vehicle auction dealer applicant, business disposal applicant, or wholesaler applicant; except that the amount of the bond must be five thousand dollars for those dealers who sell only small utility trailers that weigh less than two thousand pounds. The aggregate liability of the surety for all transactions is limited to the amount of the bond, regardless of the number of claims or claimants.
(b) No corporate surety shall be required to make any payment to any person claiming under the bond until a final determination of fraud has been made by the board or by a court of competent jurisdiction.
(3) All bonds required pursuant to this section shall be renewed annually at such time as the bondholder's license is renewed. The renewal may be done through a continuation certificate issued by the surety.
(4) Nothing in this part 1 shall interfere with the authority of the courts to administer and conduct an interpleader action for claims against a licensee's bond.
History
Source: L. 2018: Entire article added with relocations, (SB 18-030), ch. 7, p. 58, 2, effective October 1. L. 2019: (1) and (2)(a) amended, (SB 19-249), ch. 309, p. 2803, 4, effective August 2. L. 2020: (1) and (2) amended, (SB 20-140), ch. 225, p. 1102, 1, effective September 14.
Annotations
Editor's note: This section is similar to former 12-6-111 as it existed prior to 2018.
Annotations
ANNOTATION
Annotations
Law reviews. For article, "One Year Review of Contracts", see 37 Dicta 1 (1960).
Annotator's note. Since 44-20-111 is similar to repealed 13-11-9, CRS 53, CSA, C. 16, 428, and 12-6-111, relevant cases construing those provisions have been included in the annotations to this section.
There is no constitutional inhibition against the licensing and bonding requirements of this article. GMC v. Blevins, 144 F. Supp. 381 (D. Colo. 1956).
The bond is to protect the public from fraud, fraudulent representation, or violations of the law. GMC v. Blevins, 144 F. Supp. 381 (D. Colo. 1956).
This bond is an indemnification obligation, not a penal bond. Edmonds v. Western Sur. Co., 962 P.2d 323 (Colo. App. 1998).
Since this bond is legally mandated, obligation is limited to actual losses suffered by the obligee. Edmonds v. W. Sur. Co., 962 P.2d 323 (Colo. App. 1998).
Actual losses included attorney fees since 13-21-109 allows for recovery of reasonable attorney fees. Edmonds v. W. Sur. Co., 962 P.2d 323 (Colo. App. 1998).
The general assembly did not intend that the amount of funds available for reimbursement should vary depending on whether the security was in the form of a bond or cash alternative. W. Sur. Co. v. Smith, 914 P.2d 451 (Colo. App. 1995).
Since this section is general, it is broad enough to cover loss from civil as well as criminal fraud. Kilbourn v. W. Sur. Co., 187 F.2d 567 (10th Cir. 1951).
Inapplicable to mobile home dealer. Since the definition of a dealer specifies motor vehicles as the exclusive subject matter bringing a person within the coverage of this section, that bond does not cover activities in the sale of mobile homes, i.e., "movable structures". Shaw v. Aurora Mobile Homes & Real Estate, Inc. 36 Colo. App. 321, 539 P.2d 1366 (1975).
County court judgment is a final determination of fraud for purposes of subsection (2)(b). When a plaintiff won a judgment that an automobile dealer had committed a deceptive trade practice under 6-1-708 (1)(a)(I), it constituted a final determination of fraud, and the plaintiff was entitled to payment from the dealer's surety bond provider for actual damages and any attorney fees awarded by the county court. Mendoza v. Pioneer Gen. Ins. Co., 2014 COA 29, 365 P.3d 371.
Surety on an indemnifying bond, executed pursuant to the provisions of the motor vehicles dealers act, cannot be held liable for the payment of damages resulting from fraud, which actually took place prior to the date the bond became effective, upon the ground that, after the bond became effective, the wrongdoer made new false representations concerning the subject matter of his original transaction but upon the making of which the defrauded party did not part with value in reliance thereon. Mass. Bonding & Ins. Co. v. Bank of Aurora, 124 Colo. 485, 238 P.2d 872 (1951).
In an action against the surety on a used car dealer's bond executed pursuant to this section, it was held that it could not be said as a matter of law, from what was before the court on the hearing on a motion for summary judgment, that it was impossible to make out a case of fraud under this section on count one of the complaint. Kilbourn v. W. Sur. Co., 187 F.2d 567 (10th Cir. 1951).
The phrase "any person" in the pre-1992 version of this section refers only to those consumers or purchasers, including natural persons, firms, partnerships, and corporations, to whom a motor vehicle title is transferred by a bonded dealer. Consequently, the phrase does not encompass a corporation that, although not a consumer or purchaser of a motor vehicle, has a business relationship or contract with an automobile dealer. Sw. Cap. Inv. v. Pioneer Gen. Ins., 924 P.2d 1205 (Colo. App. 1996).