Is it legal to sell a vehicle with a lien on the title?

There is nothing illegal about selling an automobile which has a lien on it, just as there is nothing illegal about selling a house with an existing mortgage on it.  The buyer takes the car subject to the lien.  Just as with a home purchase, the prospective buyer is supposed to check beforehand to make sure that there are no liens.  Thus, unless the seller affirmatively told you that there were no liens (and even then you might still be out of luck if you could have discovered the lien with the exercise of reasonable diligence), you would normally be out of luck.  In this case, however, you may be able to claim fraud if you relied on the in-house finance company to do the lien search and disclose any liens to you.