The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.
Plaintiff Myron Schuster is a collector of antique automobiles. He
contends that defendant dealer, Dragone Classic Motor Cars ("Dragone
Classic"), and its two principals, defendants Emanuel Dragone
("Dragone") and George Dragone, defrauded him in two separate
transactions-the first, an alleged loan of $2,125,000, and the second,
the purchase of a 1939 Bugatti Type 57. His claims include breach of
contract based on the defendants' failure to repay the note, fraud,
breach of fiduciary duty, unjust enrichment, and violation of the
Connecticut Unfair Trade Practices Act. Defendants counterclaimed based
on plaintiff's alleged failure to pay for repair and restoration
services performed by defendants on four of plaintiff's automobiles.
During the course of the trial, the parties settled all of their
disputes relating to the 1939 Bugatti Type 57 and defendants'
non-payment claims leaving only the dispute concerning the alleged
$2,125,000 loan for resolution. This opinion embodies the Court's
findings of fact and conclusions of law following trial.
Q. He was to receive nothing else, correct?
Indeed, he went on to say that the "deal" not only was "open-ended"
but that "until the cars were inspected, that particular deal was not
finalized, because it was an unknown to all of us. . . . "
Schuster concurred in neither of these versions. He denied that he had
reached any agreement with Dragone beyond the promissory note signed on
Determination of where the truth lies here is rendered more difficult
by the substantial problems with the credibility of both Schuster and
Dragone. The two had done business in antique automobiles before, and
the record clearly shows that they collaborated in preparing documents
that falsely (and, in at least one case, dramatically) understated the
prices of automobiles purchased by Schuster from Dragone which Schuster
then filed with the Department of Motor Vehicles for the admitted
purpose of defrauding state sales tax collection authorities.*fn7 One
of Dragone's attorneys (not counsel in this case) substantially admitted
at trial that he interposed a baseless counterclaim on Dragone's behalf
in another lawsuit for the purpose of defeating an application for a
prejudgment attachment,*fn8 and his denial that Dragone was aware of
his actions was not credible. Nor was the demeanor of either Schuster or
Dragone such as to give the Court confidence in the uncorroborated word
of either of them. Nevertheless, taking all of the evidence into account,
the Court finds as follows on this central issue.
When Dragone learned that Kogan was reluctant, unable or unwilling to
come up with the necessary funds on schedule, Dragone did approach
Schuster about "staying in the deal" rather than being repaid in strict
conformity of the note. Schuster agreed to defer payment on the note
pending further developments in the transaction, and certainly discussed
with Dragone the possibility that he would be repaid in automobiles
rather than cash once the cars were received. But no definite agreement
was reached in that regard, and Schuster certainly did not agree to
become a partner or co-venturer in the deal or to convert his note into
the equivalent of an equity contribution. The only "agreement" was that
Schuster would not press for immediate payment of the note and would
consider accepting all or a greater part of the repayment of the note
than was provided therein in the form of automobiles, provided the
parties could reach agreement on the specific automobiles and the values
to be attributed to them for purposes of repaying the note.*fn9
As things developed, the cars never arrived. It appears that the funds
that Dragone put into the deal in Italy, including the money borrowed
from Schuster, were stolen. Dragone has made substantial efforts to
recover the money, but has been almost entirely unsuccessful to date.
Stated in colloquial terms, the question is whether the loss falls
entirely on Dragone because Schuster was simply a lender to him or
whether, instead, Schuster must bear part of the loss as Dragone's
The core issue in this case is whether Schuster and the defendants
entered into a novation superseding the June 4 promissory note.*fn10 As
the Court noted
in denying plaintiff's motion for summary judgment, "a novation
requires (1) a previously valid obligation, (2) agreement of all
parties to a new contract, (3) extinguishment of the old contract,
and (4) a legally valid new contract."*fn11 Having now heard the
evidence, the Court finds that these requirements are not all satisfied.
The only agreement was that Schuster would not insist on immediate
repayment and would discuss taking automobiles in repayment in the event
the automobiles were obtained. There was no agreement to extinguish the
For the foregoing reasons, plaintiff shall recover from defendants,
jointly and severally, the sum of $2,125,000 together with interest on
(a) $1,675,000 at the prime rate plus one percent, and (b) $450,000 at
the statutory rate of nine percent, in each case from the date of
commencement of this action to the date of judgment, together with the
taxable costs of this action and reasonable attorneys' fees to be fixed