Collector car dealers who sell customers’ cars and never pay them their money is not a new subject for SCM readers. But it was a whole new experience for Hans Claassen of Montrose, CO. NBC 7 San Diego recently reported that Claassen is one of many clients who claims he is owed money from CPR Classic, a classic-car restoration and sales business in Fallbrook, CA.
Claassen’s story actually starts in 1970. He had his eye on a Porsche 911, but instead, he spent his savings on an engagement ring for his soon-to-be wife. His wife reciprocated by buying him the silver 1970 Porsche 911 of his dreams as a gift. More than 50 years later, the Claassens were still married and still owned the Porsche. Unfortunately, when his wife developed dementia, Claassen decided it was time to sell the Porsche to use the money for her care.
“I really loved that car. I have a lot of memories attached to that car, trips that my wife and I had made together,” he told the television station’s reporters.
Reputable, or not?
Claassen consigned the car with CPR Classic, a seemingly reputable Porsche shop that had been in business since 1977. Founded and run for many years by Brian Doherty, the family business was acquired in 2009 by his daughter Andrea, who has continued its operations. It was well known for its restorations, but less known for a seemingly never-ending string of financial problems and lawsuits.
According to the news report, the deal Claassen made with CPR was that it would offer the Porsche at $135,000, with the dealer receiving a 10% commission on the sale. CPR picked up the car at Claassen’s home and transported it to its Fallbrook facility. Soon, Andrea Doherty told Claassen that she had a buyer and needed the title, which Claassen promptly sent. Then, Doherty told him that the sale had fallen through, but they would keep working on it.
Claassen tried to get an update on the sale for several months, to no avail. He eventually contacted Mark MacHale, a volunteer at a senior center who agreed to help him. MacHale had numerous conversations and communications with Doherty, who confirmed that the Porsche had been sold. After several months of back-and-forth, Doherty agreed to a monthly payment plan. CPR paid Classen just $10,000 of what was owed. MacHale told the NBC 7 reporters that he got a continuing string of lies and excuses, culminating in a promise that a payment was on its way and a fake tracking number.
At that point, MacHale and Claassen realized there was not going to be a happy ending, and MacHale started calling TV stations for help. This is when he found NBC 7, which launched an investigation.
Tip of the iceberg
NBC 7 found dozens of lawsuits pending against CPR, with the plaintiffs claiming they were owed over $11.7 million. Among the complaints:
- One customer gave CPR his 1960 Porsche 356 Roadster for restoration, not sale. Without authorization, CPR sold the Roadster to another customer for $160,000. The seller claims he didn’t get any of the money. The buyer claims he never received the Roadster or his money back.
- Several plaintiffs claim that they purchased and received cars from CPR but were never able to get titles for them.
- Several sellers never received their sales proceeds.
- Several buyers paid for cars but never received them.
Unable to get responses from Doherty, NBC 7 sent a reporter to the CPR facility to speak with her in person, but arrived to find the facility closed, with a sign on the door stating that their landlord had evicted them. The reporter called Doherty, who said she was happy to talk but needed to check with her lawyer first. The reporter then received a call from her now-former attorney, who said he had recommended that she not speak to anyone.
Nothing new
A significant player in the Porsche world, CPR has stirred up controversy on various internet chat boards for years. Some commenters were huge fans and talked about the high quality of its restoration work and its integrity. Others, however, reported having trouble getting paid by CPR after selling their cars.
I’ve had a couple of run-ins with CPR over the years on behalf of clients. The story was the same both times. They contacted Brian Doherty about buying a fully restored car and were told that CPR owned an excellent restoration-candidate car that would be fully restored for them at a set price, one that was quite high. Both clients were required to pay the full purchase price up front, but the finished car never seemed to arrive.
When I contacted Brian Doherty, he seemed affable enough and always expressed willingness to get things resolved. But that never happened. Requests that CPR at least sign over the title on the purchased car were sidestepped, creating suspicions that the car was not owned by CPR.
Threats of litigation resulted in a full refund in one case. In the other, Doherty offered a different car as a partial refund, since the one that had been “purchased” was no longer available. The client thought the offered car was overpriced, and there was no title provided when requested. Again, litigation threats resulted in a refund.
Risky business
It seems fairly obvious what was going on here — a classic case of robbing Peter to pay Paul. The refunds must have come from getting someone else to pay up front for a promised finished car. That business plan could only continue as long as the Ponzi-like scheme kept bringing in more new money. Once the inflows subside, which appears to have happened recently, the lawsuits get filed and everything comes crashing down. Then, it’s just a protracted legal battle that no one really wins.
As “Legal Files” has written several times before, it’s really difficult to protect yourself from unscrupulous consignment dealers. One of the realities is that dishonest businesses that are successful all manage to make themselves look reliable and trustworthy. CPR’s facility was impressive, always full of nice Porsches, and its personnel were always charming. It didn’t look like “Fast Eddie’s Used Car Lot.”
We have to recognize that appearances can be deceiving; be very careful before placing trust.
Safe practices
It’s not that hard to protect yourself when buying a car. Once you have an agreement on the purchase, structure the actual transaction to make sure you actually get what you are buying:
1. Get a copy of the certificate of title for review and approval.
2. Use an attorney as an escrow agent to handle the transaction.
3. Wire the funds to the attorney’s client trust account.
4. When the attorney has the certificate of title, properly endorsed
for transfer to you, the funds can be released and the title
delivered to you.
5. Pick up the car right away.
This is not as easy as just writing a check to the dealer, but you won’t become one of these plaintiffs complaining about never having gotten what you paid for.
Protecting yourself when selling a car is not as easy, because the law is not so friendly to your position. Once the car is given to a dealer, an innocent buyer can pay the dealer for it and acquire good title, even if you still have the certificate of title. That’s because the law favors the innocent purchaser who really has no good way of knowing whether the dealer is authorized to sell the car or not. But still, holding onto the title is worth doing.
Your consignment agreement should require that the buyer must enter into a purchase agreement directly with you, not with the dealer. That purchase agreement should call for the purchase price to be paid directly to you, with you paying the dealer its commission afterward.
It’s totally permissible to establish the same sort of escrow arrangement described above, as that process will actually protect all three parties.
Obviously, these precautions add time and effort to any deal, on all sides of the transaction. Trust me — high-end transactions get handled exactly this way all the time. Even where there is a lot of confidence, doing it this way just puts everyone at ease, and the added time and cost is not that significant.
These precautions are, of course, totally unnecessary when you are dealing with an honest and reputable dealer. But knowing whether you are is the problem, isn’t it? ♦
John Draneas is an attorney in Oregon and has been SCM’s “Legal Files” columnist since 2003. His recently published book The Best of Legal Files can be purchased on our website. John can be contacted at [email protected]. His comments are general in nature and are not intended to substitute for consultation with an attorney.