The epic legal battles over a stolen 1954 Ferrari 375 Plus Grand Prix

Karl Kleve was a Cincinnati real estate investor who amassed an impressive collection of over 400 cars. He also designed and built 24 Kleve Supercars. Among the Cadillacs, Rolls-Royces, Kleves and Bugattis was a 1954 Ferrari 375 Plus, s/n 0384AM, one of only six made.

The 375 Plus was the 427 Cobra of its era, brutally fast, with barely adequate brakes, and an adequate suspension. S/N 0384AM had a long and storied history, participating in the Mille Migla before coming to the U.S., where it was particularly successful in the races held on airbases during that time.

A similar 375 sold in the last 90 days, according to our resident Ferrari expert Mike Sheehan, in the neighborhood of $5m. So you can see that there’s enough at stake here to keep more than a few attorneys busy.

Kleve purchased S/N 0384AAM for $2,500 in 1958, in damaged condition and without an engine, after the dashboard wiring had caught fire. Kleve had the car partially disassembled for a restoration that he never seemed to get around to. It was stored outside, on Kleve’s property sandwiched in by other cars, and largely forgotten.

In 1989, Kleve learned it had been stolen when a Ferrari Owners Club acquaintance told him that three men who were trying to sell the car had contacted the club nine months previously to ask about its value.

A trip around the world

Kleve reported the car stolen and set out to find it. He hired private investigator Mark Daniels to assist in that search. Daniels traced the car through Atlanta, Saudi Arabia, Italy and France to Belgium, where it had been seized by authorities when they found it on their hot sheet.

For some reason, the Belgian authorities had released it to a Michel Krutch in 1990, who then sold it to Jack Swaters, a well-known Belgian race driver and Ferrari importer, and his partner, Philippe Lancksweert, for a documented, and absurdly low, $4,600. Swaters restored the car, installed a correct-type 375 engine and raced it extensively throughout Europe before Daniels caught up with the car.

The Ferrari is now the subject of an intense legal battle being waged in the Ohio state court system between Swaters and Kleve’s daughter, Kristine Kleve Larson, who inherited Kleve’s estate after he died in 2003.

“Legal Files” sourced its information from court filings, news reports, and Janaya Trotter of the Cincinnati law firm of Ritter & Randolph, who along with Daniel Randolph, represents Larson. “Legal Files” was unable to reach Swaters’ attorneys for comment.

An altered serial number

“Legal Files” has previously explained how different countries take different approaches to the ownership of a stolen car that has been sold to an innocent purchaser.

Belgium takes a compromise approach where the rightful owner can get the car back by paying the purchaser the amount he paid for the car. Trotter explained that Kleve tried to do just that, but Swaters refused to accept the payment. Instead, Swaters insisted that he had a different car, s/n 0394AM.

Examination of the Ferrari revealed that the serial number had been rather poorly altered by someone. However, the bill of sale Krutch gave to Swaters specifically identified it as s/n 0384AM.

The story gets fuzzy

In 1999, Swaters, Kleve and Daniels engaged in negotiations to resolve the mess, with Swaters buying the car from Kleve.

“This is where the story gets fuzzy,” Trotter said.

An agreement was apparently reached, and Kleve signed a threepage contract and sent it to Swaters. Kleve’s copy, which has only his signature on the last page, shows a purchase price of $2.5 million on page one. Swaters’ copy, with all signatures on the last page, shows a purchase price on page one of $625,000.

Larson claims that contract pages got switched—and Kleve never received any of the money. Swaters produced two checks, in the amounts of $400,000 and $225,000, but information about whether the checks were actually cashed and by whom is incomplete. It also appears that the checks might have gone to Daniels and his company, National Search Services.

Swaters filed the lawsuit to clear up the title to the car and to claim ownership of the VIN plate, hood, fuel tank, steering wheel, wheels, instruments and other body parts that Kleve had taken off the Ferrari before it had been stolen.

Larson filed a counterclaim that states she is the rightful owner of the car, and that she is entitled to pay Swaters his original purchase price of $4,600 and get it back. The parties have filed numerous procedural motions that are, as of this writing, under consideration by the judge. It seems that they have a long, and very expensive, litigation road ahead of them. But several issues have come to light that we can take a look at in normal “Legal Files” style.

Whose Parts Are These Anyway?

Swaters’ position seems to be that, when he purchased “the Ferrari” from Kleve under the disputed contract, he also became the owner of the parts that Kleve had taken off the car. Swaters apparently claims that the parts were still part of the car even though they were removed from it.

This seems to be a pretty tough claim for Swaters to win. How many times have we bought cars and learned later that various parts were retained by the seller? Can we go back and claim that we are entitled to get the original Rudge wheels for our 300SL that the seller kept in his garage? Or are we entitled only to the replacement wheels that were on the car when we bought it— and were the only wheels we ever saw? The answers seem obvious, but perhaps Swaters will teach us all something new.

It is interesting, though, that the contract makes no mention of the parts. If Swaters was expecting to get the parts, shouldn’t they have been mentioned? This is pure speculation, but he may not have known that Kleve had them. The conflict started in 2005, when Larson engaged Kruse International to auction a number of Kleve’s vehicles and the parts from the Ferrari.

Swaters’ attorney sent a letter to Larson demanding that the parts be turned over to Swaters, and Larson then withdrew them from the auction. It may be that that Swaters didn’t know the parts existed until he saw the auction listing.

Which Contract Is It Anyway?

This is going to be a huge “He said, She said” battle over the validity of the 1999 Swaters-Kleve contract. Swaters looks pretty good here with a fully-signed contract, but Larson makes good points about the strikingly different first pages and the lack of proof of payment. There doesn’t seem to be any shortcut here, and after a full trial, the answer will depend entirely upon which side produces the better evidence—and which side the judge views as the more believable.

Statute of limitations complications

Both Ohio and New York (which the 1999 contract references as the applicable law), have four-year statutes of limitation for breach-of-contract claims. This would seem to be a huge obstacle for Swaters, as he claims to have purchased the car from Kleve in 1999. If Kleve breached that contract by failing to turn over the parts, it would seem that Swaters lost his legal rights in 2003.

Swaters tries to get around that by claiming that, when Larson became the administrator of Kleve’s estate, she became obligated to fulfill Kleve’s contractual obligations to Swaters, so she is now the one who has breached the contract.

“Legal Files” knows a thing or two about probate law, and isn’t buying this argument. The administrator of an estate has all the same defenses against a claim as the decedent had, including the statute of limitations. Further, all persons who have claims against a decedent are required to present them in the probate proceeding. If a claimant fails to do so within the specific times allowed, the claim is barred, and the claimant gets no right to later sue the beneficiaries of the estate.

The scope of Daniels’ authority

The 1999 negotiations and transactions were carried out largely through Daniels acting under a power of attorney given him by Kleve. Swaters received a bill of sale and an Ohio certificate of title to the Ferrari, both signed by Daniels as Kleve’s agent. The $625,000 purchase price may have gone to Daniels.

As documentation of Daniels’ authority, Swaters submitted a signed and notarized 1999 letter of authority that Kleve gave to Daniels. However, this document seems to empower Daniels only to “pursue negotiations…for possible settlement…” regarding the stolen car. This appears to be a rather limited authorization, and it is consistent with such a limitation that the 1999 contract was signed by Kleve himself, not by Daniels. “Legal Files” expects that the scope of Daniels’ authority will be a major issue in the case.

If Daniels did not have the legal authority to sign the title documents on Kleve’s behalf, then Swaters will have to establish that the 1999 contract was legally binding and that he fully performed all of his contractual obligations in order to establish ownership of the Ferrari.

Further, the contract does not say anything about payment being made to Daniels. Swaters cannot prove that he performed under the contract by paying money to Daniels, unless either the letter of authority is broad enough to authorize Daniels to receive Kleve’s money, or he proves some other specific direction from Kleve to pay Daniels.

Innocent purchaser?

A lot will probably be made about Swaters’ innocence, or lack thereof. It’s easy enough to claim that, with all the publicity in the car collector community about the theft of this car, a person in Swaters’ position as a significant collector should have known the car was stolen when he bought it. But that is really a minor issue, as it only goes to whether or not Larson has to repay Swaters the $4,600 he paid for the car. But on the other hand, Swaters’ knowledge at the time, and his efforts to avoid returning the car to Kleve, may affect his credibility on other issues.

No matter how you cut it, this is going to be a long litigation road. We should be hearing quite a lot about this case for a long time, unless someone blinks and agrees to a quick settlement.

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