The sale of a boat is a commonplace transaction in Michigan, especially during the summer months. According to the United States Coast Guard 2014 Recreational Boating Statistics, Michigan had 789,458 registered watercraft, one of the highest numbers of registrations in the country.
As we near the end of the 2016 boating season, the Michigan Court of Appeals in Williams v. Kennedy et. al, issued Aug. 2, 2016 (Docket No. 325267), recently held that the seller of a boat does not qualify as the owner of the boat during the period after the seller delivers the certificate of title, but before the transfer of title is registered with the Secretary of State. This is significant due to Michigan’s imposition of liability on the “owner” of a watercraft for injuries caused by negligent operation of the watercraft under MCL 324.80157.
This case, not handled by CMDA, arose out of a boating accident in 2013 that caused severe injuries to a minor. Michael Metcalf sold his boat to Mark Kennedy on August 26, 2013. In exchange for the sale price of the boat, Metcalf signed and delivered a “Watercraft Certificate of Title” containing a “Title Assignment by Seller.” Kennedy left the transaction with the boat and the Certificate of Title. Kennedy was then supposed to apply to transfer the legal title with the Secretary of State as is required by statute. Kennedy attempted to do so on August 28th and August 30th, but was unable due to long lines. Before the transfer paperwork was submitted to the Secretary of State, on September 1, 2013, Kennedy piloted boat and injured a minor after striking her with the boat. Kennedy was later able to complete the transaction at the Secretary of State on September 5, 2013.
The injured minor’s mother filed a negligence action naming both the seller and the buyer of the boat. She alleged that Metcalf, the seller, was liable as an owner for the alleged negligent operation of the boat under MCL 324.80157 which imposes liability on the owner of a watercraft for its negligent operation. Because the transaction had not been completed with the Secretary of State, the Court was faced with the question of “whether the seller of a boat qualifies as an ‘owner’ during the period after a seller delivers the certificate of title to a purchase but before the transfer of title had been registered with the Secretary of State.”
The Court ultimately held that Metcalf did not qualify as an owner before the transfer of title of the watercraft was registered with the Secretary of State. The Court construed the Natural Resources and Environmental Protection Act which sets forth the requirements for applying for a certificate of title for watercraft with the Secretary of State. The Court noted that this application must be filed within 15 days after the date of the purchase, and Kennedy fulfilled this requirement. The Court also noted that the Act provides that “[i]f satisfied that the applicant is the owner of the watercraft and that the application is in the proper form, the secretary of state shall issue a certificate of title.” The Court reasoned that this suggested that ownership precedes the legal transfer of title with the Secretary of State.
Lastly, the Court construed the definition of “owner” under the Act. It noted that an owner is “a person who claims or is entitled to lawful possession of a vessel by virtue of that person’s legal title or equitable interest in the vessel.” The Court concluded that Metcalf could only qualify as an “owner” if he was entitled to lawful possession as a result of his legal title at the time of the accident. But, the Court determined that Metcalf was not entitled to lawful possession of the boat because he had already expressly transferred his possessory interest in the boat to Kennedy when he sold him the boat. Accordingly, Metcalf was not the owner of the boat at the time of the accident.
Based upon this decision, a seller of a watercraft is not an owner during the period after a seller delivers the certificate of title to a purchaser, but before the transfer of title has been registered with the Secretary of State. Although this decision seems to protect the seller of a watercraft from liability during the transfer of title, a seller of a watercraft can avoid liability for negligent operation under MCL 324.80157 by making sure that the application of a certificate of title for a watercraft is made with the Secretary of State.
Jennifer Richards is an attorney in our Livonia office where she concentrates her practice on appeals, law enforcement defense and litigation, municipal law and insurance defense. She may be reached at (734) 261-2400 or firstname.lastname@example.org.