The opinion of the court was delivered by: DAVID G. TRAGER
In this diversity action, plaintiff Spyder Enterprises, Inc. seeks to rescind its March 1990 purchase of a 1962 Lotus 24 Formula One vintage race car. Spyder is a corporation solely owned by its president, Everett Anton Singer. In his complaint, Singer alleged that the defendant, Richard Ward, made fraudulent representations to him about the car's engine in order to induce the sale. Specifically, Singer alleged that he was led to believe that the car contained a particular engine, a rare and fragile piece of machinery, which is traditionally paired with the Lotus 24 chassis. When shortly after his purchase of the car, Singer discovered otherwise, he requested of Ward to rescind the contract of sale. Ward refused to unwind the transaction.
Following a bench trial, I reserved decision pending the examination of post-trial submissions. After reviewing the submissions, I now reaffirm my initial oral determination that the sale was fraudulently induced. I find that defendant Ward made affirmative fraudulent misrepresentations to Singer in order to induce him to purchase the car, and that plaintiff is entitled to the remedy of rescission.
Grand Prix racing had its genesis with the establishment of a racing series in the first decade of this century. The first Grand Prix event took place in Le Mans, France in 1906. The organizers of the series created a "formula," or a list of parameters within which an event's and a race car's attributes must fall in order to qualify. These guidelines range from course distance and the number of qualifying events to a car's minimum weight requirements and maximum engine displacement. The formula was altered from time to time to accommodate developing automobile technology.
After World War II, the World Championship for Drivers was founded. It sanctioned a new series of racing events -- "World Champion Formula One." The FIA, or the Federation Internationale de l'Automobile, the governing body for sanctioned Grand Prix events, administered the Championship and set the Formula One regulations. The first Formula One event was held in 1950, at Silverstone, England. Top finishers in FIA sanctioned Grand Prix events were awarded points. At the end of each racing season, the racer that had earned the most points in a set number of events was declared to be the World Driving Champion. The formula originally adopted for Formula One races set a maximum engine displacement of 1.5 liters. That cap remained in effect until 1966. Engines in excess of this maximum cylinder capacity were disqualified; races that accepted cars that violated Formula One parameters could not award points to the race's winners. These races were not considered to be official "Grand Prix" events. Pl. Exh. 14; Larry Edsall, Some ABCs of Auto Racing, Autoweek, Jan. 11, 1988, at 53; Cynthia Claes, Those Numbing Numbers, Autoweek, Dec. 17, 1990, at 86.
Uncontroverted expert testimony has already established that only twelve Lotus 24 automobiles were ever built and that only nine are known to still exist. R. of 5/9/94 at 84. They were always raced in Formula One events with either a 1.5 liter "BRM" engine, or a 1.45 liter Coventry Climax engine. Id. at 78-79. Throughout the history of Grand Prix Formula One racing, Lotus 24 automobiles were never paired with two liter engines of any make. Id. at 34-35, 80-81. By the time the displacement formula was relaxed by the FIA in 1966, the Lotus 24 had retired from the Formula One racing scene. Id. at 81.
Defendant has presented evidence that two liter engines could be "destroked," that is, such engines could be mechanically adapted to a lesser 1.5 liter displacement so that they could qualify for an FIA-sanctioned racing event. However, no evidence was offered at trial that any such adaptation was ever attempted with an engine appropriate to a Lotus 24 in an FIA-sanctioned Grand Prix event. It is true that after 1966 and, indeed, to this day, two liter engines are indeed paired with Lotus chasses in certain racing events. However, those events are nonsanctioned and otherwise known as vintage historical races. They are non-FIA; therefore, participation in these events could not earn the race winners legitimate points toward the Championship.
Singer first learned that the Lotus 24 race car which is the subject of this action was for sale from an advertisement that Ward placed in the November 27, 1989, advertisement of Autoweek. It read as follows:
LOTUS TYPE 24/BRM Formula One, 1962 -- Chassis # 945 w/6-spd Colatti box, excellent original condition throughout, first class racing history, some spares, $ 300,000.
Singer testified that he had inquired about the engine paired with the Lotus in late November or early December of 1989. R. of 5/9/94 at 39-47. It is uncontested that the BRM engine that is now found in chassis number 945 has a two liter displacement and that it was manufactured sometime after the Lotus 24 had retired from Formula One competition in 1965.
Though defendant Ward testified that he never represented the engine to have a cylinder capacity of 1.5 liters, for the reasons set forth below, I do not credit his testimony. I find as a matter of fact that Singer had indeed been assured by Ward at that time that the engine was a historically appropriate 1.5 liter BRM model. I also find that this assurance was a material factor in Singer's decision to purchase the car.
Evidence abounds that Ward made an affirmative misrepresentation as to the engine's displacement. Singer's contemporaneous annotations on the Autoweek magazine page confirm that such a representation was actually made. Next to the Lotus advertisement, Singer had pencilled in his own hand. "vint. raced in UK 1.5 1. old wheels new. 2 bodies - Dick Ward." Def. Exh. C. Singer has testified that he had made these notations in late November or early December of 1989, when he first spoke with Ward about the car. As noted above, Singer's writings on the page includes the notation "1.5 1." i.e., that the engine in fact possessed a 1.5 liter displacement. Singer produced documentary evidence, in the form of his telephone bill that revealed that there were communications between Ward and himself as early as December of 1989. On December 10, 1989, only two weeks after the advertisement appeared in Autoweek, Singer telephoned Ward and spoke with him for twenty-six minutes. Pl. Exh. 19; R. of 5/11/94 at 30. Singer's writings were consistent both in format and in substance with his account of this telephone conversation. At one point, Ward's counsel implied that the notes might have been made after the event. Whatever slight possibility there was that this occurred is belied by defendant's false testimony that he never spoke to Singer until sometime in late February or early March of 1990. R. of 5/10/94 at 205. Singer's telephone records establish the falsity of Ward's claim. Moreover, given Singer's demonstrated regard for provenance, it is ...