$3.8 Million Vintage Mercedes Stolen in WWII Heading Back to Rightful Owners

[enzo1]

Buying a car with undocumented history can be a risky, and in cases like this, expensive gamble.
Dutch car collector Frans van Haren wasn't pleased when his ultra-rare 1937 Mercedes 500 K Roadster, bought at an RM Auctions event last year for $3.767 million, was seized by German police while it was on display at the Techno Classica car show in Essen, Germany.And he'll be even less impressed with a German's court ruling on the issue of the car's provenance that the rare vintage Mercedes was a "spoil of war," illegally liberated from Germany.

As a result, the descendants of the original owner now have a legitimate claim to the car's ownership.The car was seized following a claim made to the police by a custodian acting on behalf of the family of German industrialist Hans Friedrich Prym, the car's first owner. Prym's heirs believe the rare 500 K - only 392 were made, just 29 of which were bodied as roadsters - was stolen, and not sold to an American soldier in 1945 as is believed.With the car returning to the country where the alleged crime took place, this is the first time police were able to seize the car under court order.
Having resolved the longstanding issue over the car's provenance, the German courts are yet to decide what to do next with the car, but the Pyrm family's attorney, who will now file suit for it to be returned, has confidence it will be following the court's ruling. "We think the decision is right and it's an important step toward restitution. I am extraordinarily happy for the Pyrm family."As for the rare vintage car's current owner Frans van Haren, he will simply be left to rue the day he spent almost $3.8million on a car that came with undocumented history prior to 1970. An expensive lesson learned.

[Joe Bob]

Oi...I see a cascade of lawsuits....

[Erakad]

Doesn't apply to just rich industrialists, same happened to a friend of mine. He bought a car from someone, had a clear title, made improvements to the car, and owned it for a couple years. One day the police showed up, said it was stolen, and returned it to the original owner! Apparently, was never paid off on an insurance claim, so the original owner got the car back.

[Jim Richards]

That's got to hurt.

[intakexhaust]

I would think RM Auctions has a responsibility here. No matter the law, I'd be after that auction house and reputation. Different situation but wasn't there an Auto-Union GP car pulled a few years ago (was on display in N.Y.) for a fabricated story?

Also, its not smart exposing your fine cars or keeping in one place.

[fastfredracing]

This is exactly what happened to a lot of owners of cars that were sold by my douchenozzle ex landlord who was stealing cars. Some of these poor people had owned the cars for 4-5 years, and had also paid good money, not knowing they were stolen. Then one day, police show up, seize the car, and they had no recourse. I am surprised that no one has taken a shot at him yet.

[szyzygy]

probably some dooche like this guy inherits it:

[stomachmonkey]

Well someone got the $3.8 million. Not like it just vanished into thin air.

I'd be chasing it and if I had 3.8 for a car I probably have enough for some good attorneys.

[McLovin]

Originally Posted by szyzygy

probably some dooche like this guy inherits it:

Ja ja ja, mach schnell mit der art things, huh? I must get back to Dancecentrum in Stuttgart in time to see Kraftwerk.

[strupgolf]

I'd say RM auctions has to be responsible for the mix up. The original family has the right to the car, but if no bill of sale comes up, then who's to say. Boy of boy, that's lots of coin to see fly away, but lots of attorneys will sure show up, as always.

[BReif61]

That's an expensive kick in the shorts.

Guess there's no statute of limitations on car theft in Germany?

[Tobra]

Stolen is stolen, no statute on "it legally belongs to this guy" They just can't toss anyone in the can for stealing it.

[HardDrive]

Originally Posted by McLovin

Ja ja ja, mach schnell mit der art things, huh? I must get back to Dancecentrum in Stuttgart in time to see Kraftwerk.

lolz.

[Nate2046]

Not sure how I feel about the car going back to the family of Nazi sympathizers who profited from slave labor. Not saying the current family should be punished for the crimes of their ancestors but I certainly don't think they are deserving of some great windfall.

Was this Mercedes War Booty?

[enzo1]

Originally Posted by Nate2046

Not sure how I feel about the car going back to the family of Nazi sympathizers who profited from slave labor. Not saying the current family should be punished for the crimes of their ancestors but I certainly don't think they are deserving of some great windfall.

Was this Mercedes War Booty?

In late March, Frans van Haren and Tony Paalman, Dutch car collectors and business partners, put their 1935 Mercedes-Benz 500K Roadster on display at the Techno Classica car show in Essen, Germany.
The two men had bought the car, Lot 147, for $3,767,500, including buyer’s premium, at RM Auctions’ 2011 sale in Monterey, CA.

Life was good — until the German police, executing a warrant issued by a local court, seized the 500K on the basis that it had been stolen from its rightful owner in 1945.

The two men, who have millions invested in this car, were stunned.

The legal knots are plentiful — and very complicated — in this case. But let’s first look at a little history.

Digging into a murky past

The RM Monterey catalog stated that this 500K, after being featured in the 1935 Berlin Motor Show, was sold to Hans Friedrich Prym in 1935. In the 1970s, it “turned up in the collection of pioneer collector Russell Strauch.” The almost four decades in between were explained by, “Its interim history is unknown at this time.”

That huge gap set Paalman to work researching history. He determined that Prym was a very wealthy man. His family had been industrialists since about 1650.

In 1935, the family company was doing extremely well, having invented the snap fastener used on clothing. But, according to Paalman, Prym had a dark side. “Although no one has proven that Prym was a member of the Nazi Party, he definitely did work for the Nazis,” Paalman said. “The factory had been converted to manufacture airplane parts using about 600 slave laborers, many of whom died on the job.”

The Prym family lost everything after the war, the crowning blow being approximately €30 million they were forced to pay in damages to the families of the slave laborers and fines from their convictions for cartel formation.

The family company survives today but is no longer owned by the Pryms.

The legal claims

German law seems to be fairly similar to U.S. law in one regard. The owner of stolen property can have a court seize the property — to be held under court order — until the ownership can be resolved. In the U.S., the owner would have to provide very strong evidence that he was likely to prevail in the litigation, and he would also have to post a bond to protect the interests of the other party.

Here, the seizure is the result of a court filing from Prym’s surviving son and grandson.

Their claim that the 500K was stolen is based upon their testimony that they had heard Prym say that “the car had been taken from them” and that the car “was stolen by the Americans.” However, there is no record of the car ever reported as stolen or of any previous efforts to recover it.

Paalman thinks that this is pretty skimpy evidence and shouldn’t have been enough to justify seizure, but he attributed the result to the filing for the warrant having been made on a Saturday morning and presented to a fill-in judge.

Paalman thinks the Pryms stand very little chance of success. He also believes the case raises very troubling issues — one being that many Germans very much want to forget everything about the grim Nazi years.

Paalman also claims there has never been a case in which the Americans were found to have stolen anything during their occupation of Germany.
“There are a few cases of Russians having done that, but never an American,” Paalman said. “Every time the Americans confiscated any property, it was always done through proper legal means.”

Maybe the courts move faster in Germany, and this will all sort itself out soon for van Haren and Paalman. Nonetheless, let’s consider some of the interesting legal issues this case raises. What would happen if the car is determined to have been stolen from Prym?

Seller on the hook

There seems to be little doubt that the seller, which in this particular case was the Lyon Family Collection, would be liable. Under U.S. law, a seller of stolen property has no title to the property, and can therefore not pass good title to the innocent purchaser. Since passing legal title is of the essence of the sale, the seller would definitely owe the buyers a full refund.

The seller would then have full recourse against his seller, as he never had good title to the car either. However, that would be limited to the amount he paid for the car — not the amount he got for then selling the car.

That result comes from the theoretical nature of the legal action, which is “rescission.” The innocent buyer is able to rescind (or unwind) the transaction, and put each party where they stood before the sale. That gets the buyer his purchase price back, and he just loses his profit.

And that legal concept goes back in successive levels, from seller to seller (seven in this case), and each is entitled to full refunds. But once the chain is broken — which happens when a buyer cannot find or recover from his seller for any reason — the music stops and he is left holding the bag. He cannot skip over his seller to reach the previous seller because he has no contractual relationship with him.

No auction company liability

Readers may wonder what RM’s liability might be here. In all likelihood, the answer is not much. In an auction transaction, the auction company is not the seller, even though the buyer writes his check to them. Rather, the auction company is regarded as the seller’s agent, merely assisting the seller in the transaction. The auction company may well be required to give up its commissions on the sale, but that is about it. Further, all auction companies use seller and bidder contracts that make that pretty clear.

Should the auction company have found out about this problem beforehand? RM, like all major auction companies, puts great effort into researching the cars in their auctions. They don’t want problems like this to arise, as their business models are focused on creating happy buyers. If their efforts fail, can they be held liable for negligence?

Probably not.

Auction companies’ bidder contracts make very clear that any efforts in this regard are made for their own protection. They do not assume any obligation to the bidder, who is required to perform his own investigation, if any. And that really makes perfect sense. The opposite rule would transform the auction company from a seller’s agent to a seller or an insurer, which is not part of the deal.

But since we’re getting into hypotheticals here, what if the auction company knew about this claim ahead of the auction? That would make things quite different.

Any sensible auction company would bring that to the attention of the seller and ask him to explain matters. After all, it’s his car and therefore his problem. If the seller deals with the problem satisfactorily — or gives the auction company adequate assurances that the claim is unfounded — the auction company should be free to proceed, perhaps even without disclosure to bidders. But if the seller doesn’t handle the situation adequately, then he would be proceeding with a misrepresentation or fraud. And, the auction company would be participating in that, making itself liable to the buyer as well.

International law quirks

In this case, German law seems similar to U.S. law — the rightful owner is protected, while the innocent purchaser is not. But in some countries, the innocent purchaser keeps the car and the rightful owner has to find and sue the thief.

Say, for example, van Haren and Paalman had purchased the car at an auction in Italy, where the law allows the innocent purchaser to keep the car. Would the German court apply the law of Italy, where they bought the car, and let them keep the 500K?

Or would the court apply German law and give it to the Pryms? And if van Haren and Paalman lost the car in German court, what would happen when they went back to Italy to sue the seller? Would the Italian court apply Italian law to conclude that the seller gave them good title so he can’t be sued, making it their problem that they chose to take the car to Germany?

Enough about these hypothetical cases, as the actual case promises to be complicated enough.

We’ll keep track of this case, and keep you posted when some of the legal knots get untied. Don’t expect this to happen quickly.