60-1419. Dealer's licenses; bond; conditions.

(1) Applicants for a motor vehicle dealer's license, trailer dealer's license, or motorcycle dealer's license shall furnish, at the time of making application, a corporate surety bond in the penal sum of fifty thousand dollars.

(2) Applicants for a motor vehicle auction dealer's license shall, at the time of making application, furnish a corporate surety bond in the penal sum of not less than one hundred thousand dollars. The bond shall be on a form prescribed by the Attorney General of the State of Nebraska and shall be signed by the Nebraska registered agent. The bond shall provide: (a) That the applicant will faithfully perform all the terms and conditions of such license; (b) that the licensed dealer will first fully indemnify any holder of a lien or security interest created pursuant to section 60-164 or article 9, Uniform Commercial Code, whichever applies, in the order of its priority and then any person or other dealer by reason of any loss suffered because of (i) the substitution of any motor vehicle or trailer other than the one selected by the purchaser, (ii) the dealer's failure to deliver to the purchaser a clear and marketable title, (iii) the dealer's misappropriation of any funds belonging to the purchaser, (iv) any alteration on the part of the dealer so as to deceive the purchaser as to the year model of any motor vehicle or trailer, (v) any false and fraudulent representations or deceitful practices whatever in representing any motor vehicle or trailer, (vi) the dealer's failure to remit the proceeds from the sale of any motor vehicle which is subject to a lien or security interest to the holder of such lien or security interest, and (vii) the dealer's failure to pay any person or other dealer for the purchase of a motor vehicle, motorcycle, trailer, or any part or other purchase; and (c) that the motor vehicle, motorcycle, motor vehicle auction, or trailer dealer or wholesaler shall well, truly, and faithfully comply with all the provisions of his or her license and the acts of the Legislature relating to such license. The aggregate liability of the surety shall in no event exceed the penalty of such bond.

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Annotations

A false representation, standing alone, is insufficient to justify recovery by a lienholder under subsection (2)(e) of this section. The lienholder must also show that its loss is proximately caused by the false representation. This section provides no relief for conversion of a vehicle apart from a cause of action for false representation. First Nat. Bank in Morrill v. Union Ins. Co., 246 Neb. 636, 522 N.W.2d 168 (1994).

A motor vehicle dealer's bond protects persons in addition to purchasers against loss resulting from misappropriation of funds belonging to the purchasers. A bank can recover on a motor vehicle dealer's bond if it can prove that it sustained a loss as a result of the dealer's breach of one of the conditions of the bond. Adams Bank & Trust v. Empire Fire & Marine Ins. Co., 235 Neb. 464, 455 N.W.2d 569 (1990).

A bank, if it can prove a loss occasioned by a statutory motor vehicle dealer's breach of one of the conditions outlined in this statute, is entitled to recover on the dealer's statutory bond. Havelock Bank v. Western Surety Co., 217 Neb. 560, 352 N.W.2d 855 (1984).

A motor vehicle dealer's bond, furnished pursuant to the provisions of this section, which creates a liability on the part of the surety to indemnify any person "by reason of any loss suffered" requires proof of an actual loss suffered before recovery is permitted, and does not cover statutory penalties. Darr v. Long, 210 Neb. 57, 313 N.W.2d 215 (1981).

Failure of motor vehicle dealer to keep a promise to do an act in the future did not amount to fraud. Sterner v. Lehmanowsky, 173 Neb. 401, 113 N.W.2d 588 (1962).

Any loss by reason of a motor vehicle dealer's conduct in engaging in acts prohibited by law and enumerated in this section entitles the offended party recourse on a motor vehicle dealer's bond. A dealer's oral promise to repay a party upon the subsequent sale of vehicles did not create a security interest, and therefore, the dealer's failure to remit the proceeds to the party did not amount to a misappropriation of anyone's funds, nor was the dealer's failure to pay an unlawful act. Paus Motor Sales, Inc. v. Western Surety Co., 6 Neb. App. 233, 572 N.W.2d 403 (1997).