I'm Lucy, and I'd be happy to answer your questions today. I'm very sorry to hear that this happened.
Police should not have shown up and seized the vehicles when you have the titles, because that's essentially them finding you guilty without a trial. They could have questioned you. They could have told him to file a Small Claims suit against you (which is what they should have done), but it's an abuse of power to just show up and take the cars based on his word and nothing else. Most people don't have their titles lying around with the cars, so the fact that you have the titles is strong evidence that you paid. And there was no basis whatsoever for taking the car that didn't even have his name on it. Also, they needed a warrant to seize those items, and seized items aren't immediately returned - they would need to be held by the police until you went to trial.
Also, selling you a car, "forgetting" to sign the title, and then reporting it stolen is fraud. The judge shouldn't have told you to go to small claims.
You have the ability to file a Complaint against the guy who sold the car, as you were told. But you may also want to go to the police station and ask to talk to someone higher up the chain of command to file a complaint against the officer. INSIST that someone take a police report for fraud. You can't make them investigate it, but you can make them take a record. And if no one at the police station will do anything, you may want to alert the media to see if a reporter can investigate and help put some pressure on them to do the right thing. You may also want to talk to a local attorney about filing a civil rights violation lawsuit against the officer for seizing your property without a warrant and without giving you notice and an opportunity to be heard before giving it to someone else.
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