Opinion ID: 1391596
Heading Depth: 1
Heading Rank: 2

Heading: the regulation

Text: The district court concluded that regulation 42-6-134 is invalid for the following reasons: its adoption was not based on the record of the rule-making hearing; it constitutes an unlawful exercise of the department's delegated authority; it represents an unlawful delegation of enforcement powers to third parties; it conflicts with certain provisions of the Certificate of Title Act, section 42-6-101 et seq., C.R.S.1973; and it deprives appellees of due process of law. We reach contrary results and uphold the validity of the regulation.
The district court's determination of the regulation's invalidity focused on the record of the rule-making hearing conducted pursuant to section 24-4-103(4), C.R.S.1973 (1979 Supp.). Specifically, the court found that only those objecting to the regulation made submissions at the rule-making hearing and that the record contained no submissions in support of the regulation. The district court's determination fails to recognize the function and purpose of a rule-making hearing, as distinguished from an adjudicative proceeding. Section 24-4-103(4), C.R.S.1973 (1979 Supp.), provides: The rules promulgated by the agency shall be based on the record which shall consist of proposed rules, evidence, exhibits, and other matters presented or considered.. . . The purpose of a public rule-making hearing is to afford interested persons an opportunity to submit written data, views, or arguments . . . . Section 24-4-103(4), C.R.S.1973 (1979 Supp.). Although section 24-4-103(4) provides that the agency shall consider all submissions, it does not provide that such submissions shall be controlling even when unrebutted. The department proposing the regulation has no affirmative duty to offer evidence in support of it. As long as the proposed regulation is made part of the record, as was done here, the agency can choose to disregard, after consideration, adverse submissions and adopt the proposed regulation. We conclude, therefore, that the department's adoption of regulation 42-6-134 did not contravene the rule-making procedures of section 24-4-103(4), C.R.S.1973 (1979 Supp.).
In determining that regulation 42-6-134(I)(iv) was an unlawful exercise of delegated authority the district court stated: The term `salvage' is found to have a multitude of meanings in both law and common usage. The most appropriate, and only accurate meaning for the term as used in § 42-6-134, C.R.S.1973, is that which covers the physical acts of removing of economically valuable parts from an automobile, the scrapping of said vehicle for its inherent metal components, or the physical adaptation of the motor vehicle for some alternative physical, utilitarian purpose. . . . The court then concluded that the decision of an insurance company to sell a vehicle as salvage after a total loss settlement did not comport with the above definition of salvage. We disagree with this analysis. Prior to the 1976 amendment, section 42-6-134, C.R.S.1973, provided that a certificate of title need be surrendered only upon the destruction or dismantling of said motor vehicle or upon its being changed in such manner that it is no longer a motor vehicle . . . . However, section 42-6-134 was amended in 1976 to require the surrender of the certificate upon the vehicle's being sold or otherwise disposed of as salvage. The trial court's restrictive definition of salvage was essentially a paraphrase of the pre-1976 statute, and it gave no effect whatever to the 1976 amendment. By that amendment the legislature obviously intended to extend the owner's duty of title-surrender to those situations where the vehicle is sold or otherwise disposed of as salvage. The subject matter of the regulation is consistent with that legislative intent. Furthermore, the regulation was promulgated pursuant to the Certificate of Title Act, section 42-6-101 et seq., C.R.S. 1973. The director of the department is charged with the administration of this act and, for that purpose, he is vested with the power to make such reasonable rules and regulations . . . and provide such procedures as may be reasonably necessary or essential to [its] efficient administration. . . . Section 42-6-104, C.R.S.1973. Clearly, the regulation is within the director's delegated authority and is in keeping with his rule-making power under the Act.
The district court was in error in concluding that the regulation is an unlawful delegation to a third party, to wit: the automobile insurance industry, of an operative part of a state law which carries criminal sanctions for its violation. Regulation 42-6-134(I)(iv)(b) provides that a transfer of a damaged and unrepaired motor vehicle retained by the owner after a total loss settlement by an insurance carrier shall be treated as sold or otherwise disposed of as salvage. Appellees, relying on People v. Vinnola, 177 Colo. 405, 494 P.2d 826 (1972), argue that the regulation unconstitutionally grants the automobile insurance industry unfettered discretion to determine whether or not an owner is subject to criminal liability for failing to surrender the certificate of title after a total loss settlement. We find this argument untenable. Admittedly, the owner's transfer of a damaged and unrepaired vehicle to another, after a total loss insurance settlement, requires the owner to surrender his title certificate or face liability for a class 1 petty offense under section 42-6-134, C.R.S.1973 (1979 Supp.). However, the determinative fact of liability is not the insurance company's decision to make a total loss settlement with the owner. Rather, liability depends upon the owner's failure to surrender the title in connection with his transfer of the damaged and unrepaired vehicle to another  an act which is clearly a sale or other disposition as salvage under the statute. The owner has the same responsibility of title-surrender when he transfers to another a damaged and unrepaired vehicle not covered by insurance, and the vehicle has an estimated value in excess of $1,000, but the estimated cost of repair exceeds its wholesale cost. Regulation 42-6-134 (I)(iv)(c), 1 C.C.R. 204-2. This act of the owner also qualifies as a sale or other disposition as salvage under the statute. Contrary to the district court's determination, we do not perceive the regulation as an unlawful delegation to insurance companies of authority to determine or control the criminal responsibility of the owner. See Norsworthy v. Department of Revenue, 197 Colo. 527, 594 P.2d 1055 (1979). [5]
The district court invalidated the regulation on the ground that it denies the appellees their statutory right to prove ownership under sections 42-6-108 and 109 of the Certificate of Title Act, and, because of this conflict, the regulation is beyond the scope of delegated agency power under section 24-4-103(8)(a), C.R.S.1973 (1979 Supp.). We find no such inconsistency between the regulation and the Certificate of Title Act. Section 42-6-108 provides that no person shall sell or otherwise dispose of a motor vehicle without delivering the certificate of title to the purchaser or transferee, and no right, title, or interest in the motor vehicle is acquired until the title certificate is properly transferred. Section 42-6-109 requires the owner to execute a transfer of the title certificate upon sale or transfer of the vehicle, and the purchaser must then present the transferred certificate to the department for a new certificate. However, even prior to the 1976 amendment of section 42-6-134, the statute required vehicle owners to surrender their certificate of title upon the destruction or dismantling of said motor vehicle or upon its being changed in such manner that it is no longer a motor vehicle. The failure to deliver a certificate of title does not prevent the acquisition of ownership rights as between the parties to the transaction. United Fire and Casualty Co. v. Perez, 161 Colo. 31, 419 P.2d 663 (1966); Morrison v. Droll, 41 Colo.App. 354, 588 P.2d 383 (1978). See also Randall v. Carroll, 30 Colo.App. 45, 488 P.2d 250 (1971). This is especially so in the case where, as contemplated by the 1976 amendment to section 42-6-134, the vehicle is sold or otherwise disposed of as salvage, and there is no certificate of title to transfer to the salvage-yard operator because of the owner's surrender of it to the department. We construe section 42-6-134 and the 1976 amendment thereto as exceptions to the title transfer requirements of sections 42-6-108 and 109. This construction gives effect to the statute in its entirety, section 2-4-201(1)(b), C.R.S.1973, and is consistent with the object sought to be attained by the 1976 amendment, section 2-4-203(1)(a), C.R.S.1973.
The district court concluded that the regulation deprived appellees of a property interest without due process of law. U.S. Const. Amend. XIV; Colo. Const. Art. II, Sec. 25. The court, however, neither described the property interest nor specified the manner of deprivation. Conceding that the regulation precludes salvage-yard operators from receiving a certificate of title upon transfer to them of a vehicle sold or otherwise disposed of as salvage, their due process rights are not implicated unless they have a property interest in title certificates as the exclusive evidence of their ownership interest in salvage-vehicles. We find no such property interest amounting to a constitutional entitlement under the circumstances here. Business activities are subject to reasonable regulation by the state in the exercise of the police power to preserve and enhance the public health, safety and welfare. Lincoln Union v. Northwestern Co., 335 U.S. 525, 69 S.Ct. 251, 93 L.Ed. 212 (1949); see also, e. g., New Motor Vehicle Board v. Orrin W. Fox Co., 439 U.S. 96, 99 S.Ct. 403, 58 L.Ed.2d 361 (1978); People ex rel. Dunbar v. Gym of America, Inc., supra . The proper test in a case such as this is whether the regulation is reasonably designed to further a legitimate state interest. Winkler v. Department of Health, 193 Colo. 170, 564 P.2d 107 (1977); City of Englewood v. Apostolic Christian Church, 146 Colo. 374, 362 P.2d 172 (1961). Regulation 42-6-134(I)(iv) clearly satisfies this test. By requiring the owner of the vehicle to surrender the certificate of title to the department upon the vehicle being transferred to a salvage-yard operator, the regulation deters a salvage switch and renders less likely the opportunity for use of the certificates of title in connection with automobile thefts. Moreover, the regulation does not divest the appellees of a property interest in salvage-vehicles. On the contrary subsection (IV) of the regulation provides for the issuance of a salvage receipt upon surrender of the title, and that salvage receipt may then be used in any subsequent transfer of the salvage-vehicle. If the salvage-vehicle is rebuilt or restored so as to be eligible for further use on the highway, then upon presentation of the salvage receipt, along with proof of the vehicle's restoration, a certificate of title may be issued. [6]
The appellees in the complaint claimed that the regulation denied them equal protection of the laws under the federal and state constitutions. U.S. Const. Amend. XIV; Colo. Const, Art. II, Sec. 25. [7] They claimed that owners of vehicles not the subject of insurance settlements are not required to surrender certificates of title whereas the appellees, as the ultimate transferees of comparably damaged vehicles that were the subject of insurance settlements, are prohibited from acquiring ownership by certificates of title. The district court did not address the equal protection claim. We find no merit in it. [8] Contrary to appellees' assumption, the regulation does require an owner who transfers a damaged vehicle to surrender the certificate of title when the vehicle is valued in excess of $1,000, it is not covered by insurance, and the cost of repair exceeds its wholesale value. Regulation 42-6-134(I)(iv)(c), 1 C.C.R. 204-2. Moreover, any classification with respect to motor vehicle owners required to surrender their certificate of title upon sale or other disposition as salvage is reasonably related to a legitimate governmental purpose. Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 96 S.Ct. 2488, 49 L.Ed.2d 220 (1976); Dandridge v. Williams, 397 U.S. 471, 90 S.Ct. 1153, 25 L.Ed.2d 491 (1970); Williamson v. Lee Optical Co., 348 U.S. 483, 75 S.Ct. 461, 99 L.Ed. 563 (1955); Winkler v. Department of Health, supra ; Edwards v. Price, 191 Colo. 46, 550 P.2d 856 (1976); Stevenson v. Industrial Commission, 190 Colo. 234, 545 P.2d 712 (1976).