A candy-apple red 1967 Shelby Mustang GT500 is at the center of an unusual court fight, and the car is lingering at a salvage yard until a judge decides who owns it.

Even stripped-down and without an engine, the body of the classic Mustang could be worth $30,000. If restored, it could garner $200,000 from an interested buyer.

The car was reported stolen in 1980 and, officially, never recovered. But Jeff Dove, the man who reported it stolen, died last year, leaving behind a tangled legal web.

Tim Shuler, an Aurora man who spent time and money trying to restore the car, and American Family, the insurance company that paid $14,000 on the theft claim 30 years ago, are at odds over who owns it.

Shuler, 42, fell in love with Mustang muscle cars when he was 8 years old, riding in the back of his uncle’s 1968 Shelby KR Mustang while speeding down Interstate 25.

“I remember standing up in the back seat when he was doing 140,” Shuler said. “I was looking over his shoulder at the speedometer.”

The mystique of the Shelby dates back to the 1960s, when Carroll Shelby, a race-car driver turned automotive designer, helped Ford turn the Mustang into a racer by changing the suspension and the design.

Ford made a million Mustangs by the mid-1960s, but only 3,000 of them were Shelbys, making them a rarity coveted among collectors.

“It is the cream of the crop of Mustangs if you are a Mustang enthusiast,” said Joe Bolis, the Colorado president and regional representative of the Shelby American Automobile Club.

As a teenager, Shuler got addicted to racing cars at Bandimere Speedway. He loved racing so much that he sometimes slept only a couple of hours before waking up and racing again.

Shuler began restoring cars as a hobby, and when Dove came to his Aurora home in 1996 and asked him to refurbish his ’67 Shelby, Shuler agreed.

Over a 12-year period, Shuler stored the car at his house, restoring only the steering wheel. Shuler says he also loaned Dove money with an agreement that the car was collateral.

“He has legal claims to the car because he held it so long and he had an oral contract with Mr. Dove,” said Shuler’s attorney Kevin Flesch.

When Dove first brought the car to him, Shuler asked Dove for the title, but Dove told him he had lost the paperwork.

Dove never returned for the car, and in May 2008, Shuler decided to title the Shelby for himself.

When Shuler took it to the Division of Motor Vehicles, a state trooper ran the car’s vehicle identification number through the National Crime Information Center and it cleared, but when the trooper ran it through an online insurance-theft database, the Shelby came up as stolen.

Shuler said it’s possible that Dove defrauded the insurance company, but he also believes that it’s possible the car was recovered. According to investigative reports, the Colorado State Patrol questioned Dove before he died, and Dove told them the car had been recovered, but had been so stripped, they allowed him to keep the insurance payout.

Steve Witmer, a spokesman for American Family, said the company is certain that it paid out $14,000 to Dove on the stolen car, meaning that if it has now been found, it belongs to the insurer. He also acknowledged that American Family lost the file on the Shelby — including the title to it.

“It’s not normal for information like a title to be destroyed,” Witmer said, but the company does have some remaining documentation that a claim was paid.

That explains why Shuler and American Family are fighting in court. But why is the Shelby in an impound yard?

Shuler said that’s because a State Patrol detective accused him of stealing the car and running a chop shop.

And that is because a second VIN was stamped on the Shelby — one that identified it as a yellow Ford Mustang. Detectives suspected the second VINs were from another vehicle.

The State Patrol seized the car from Shuler’s house because Shuler refused to relinquish it voluntarily.

Shuler said he didn’t trust the State Patrol’s investigator because he allegedly was mistreated. Shuler eventually filed a complaint against Investigator Zach Murray with internal affairs.

In a letter to Shuler, the State Patrol determined Murray “had sufficient probable cause to investigate the lawful ownership of the vehicle.”

“It’s the principle of the thing,” Shuler said of refusing to turn over the Shelby. “It’s abusing their authority.”

In December 2008, Shuler was charged with two felony counts of altering the VINs on the Shelby.

“I didn’t do anything wrong,” he said. “I’ve never been in trouble. I never hid this car from anybody.”

The case was later dismissed by the district attorney in Arapahoe County and a judge ordered that the Mustang be released to Shuler.

But when Shuler went to the salvage yard with his court order, he learned the State Patrol and American Family had placed a legal hold on the Shelby.

The insurance company then filed a lawsuit against him in Douglas County. A hearing is scheduled for July 2.

If the Shelby is returned to Shuler, he said he’ll be forced to sell it because he owes money to friends who helped him with his legal fees.

“I will find a good home for it,” he said, “but I am not going to quit.” Shuler said he already knows two interested buyers.

The fight over the Shelby isn’t about money, Shuler said, because he’s never made more than a few thousand dollars restoring cars.

“In this business, you have to have heart,” he said.

Felisa Cardona: 303-954-1219 or fcardona@denverpost.com