Heydt v. Ebert

• Docket Number: 82304-3-I,82401-5-I
• Decision Date: 29 August 2022
• Parties: DAGMAR VON HEYDT, Respondent/Cross Appellant, v. MICHELLE EBERT and JASON A. BRUERS, wife and husband and the marital community composed thereof, Appellants/Cross Respondents.
• Court: Washington Court of Appeals

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DAGMAR VON HEYDT, Respondent/Cross Appellant, v. MICHELLE EBERT and JASON A. BRUERS, wife and husband and the marital community composed thereof, Appellants/Cross Respondents.

Nos. 82304-3-I, 82401-5-I

Court of Appeals of Washington, Division 1

August 29, 2022

UNPUBLISHED OPINION

Bowman, J.

Michelle Ebert and Jason Bruers appeal jury verdicts for fraud, unjust enrichment, breach of fiduciary duty, breach of contract, and intentional infliction of emotional distress in favor of Ebert's mother, Dagmar von Heydt. Ebert and Bruers allege several evidentiary and instructional errors and argue the trial court abused its discretion by denying their postverdict motions. They also argue substantial evidence does not support the jury verdicts and cumulative error resulted in an unfair trial. Von Heydt cross appeals the trial court's order denying her request for attorney fees. We remand to vacate the jury's verdict on the fraud claim as to Bruers but otherwise affirm.

FACTS

Ebert is von Heydt's youngest child and only daughter. Ebert enjoyed a close relationship with von Heydt growing up and into her early adult years. The two spent considerable time together, particularly as Ebert started a family with her husband David Ebert in the 1990s. David^[1] owned adult entertainment businesses and met Ebert when she worked as a dancer in one of his clubs.

A federal prosecution for racketeering in July 2010 forced David out of the adult entertainment industry. In 2013, Ebert and David divorced. But Ebert stayed in the adult entertainment business. She took out a loan to buy a building on 4th Avenue South in Seattle and started a limited liability company, MRAE LLC, to manage the building. Ebert was the sole member of MRAE, which held the building as its only asset. In January 2014, Ebert opened a nightclub on the property called Kittens Adult Cabaret. Ebert owned Kittens through K-Cab LLC (KCAB), another company she created with herself as its sole member. Kittens rented space in the 4th Avenue South building from MRAE.

Since Kittens occupied about two thirds of the 4th Avenue South building, Ebert decided to open a second business in the remaining space. She first considered opening a lingerie store but changed her mind after receiving advice from Kittens employee Xten Barton. Barton suggested Ebert make the space into a restaurant and bar because Washington prohibits alcohol inside adult entertainment clubs. A restaurant would complement Kittens, allowing patrons to access food and beverages right next to the club. Ebert thought the idea was "great." She secured a $300,000 loan from a private lender and began transforming the extra space into the Dog House Bar and Grill (TDH).

Ebert began dating Bruers in April 2014. Bruers worked in construction and helped build TDH. But to operate as a bar TDH needed a liquor license from the Washington State Liquor Control Board (WSLCB).^[2] Ebert had a prior conviction that she thought could make it harder for her to get the license. But mostly, Ebert worried the WSLCB would be suspicious if she applied for a liquor license while also owning Kittens. So she asked von Heydt to apply for the license.^[3] Von Heydt agreed. Ebert then arranged for her attorney to create TDH LLC with von Heydt owning 90 percent and Barton owning 10 percent. In May 2014, TDH^[4] executed a lease with MRAE to pay rent of $5,000 per month for a term of five years. In August, the WSLCB approved TDH's liquor license.

According to von Heydt, Ebert also approached her with a plan to invest money in TDH. Ebert told von Heydt the investment would give Ebert sufficient funds to complete the bar and give von Heydt financial security through a share of TDH's profits. Ebert suggested von Heydt sell her Everett condominium, which she owned mortgage free, and put the sale profits and other cash assets into the business. In exchange, Ebert would give von Heydt an immediate place to live on Ebert's 20-acre property in Kent and later build von Heydt her own home. Relying on Ebert's promises, von Heydt listed her condominium for sale in April 2014 and it sold in June. Von Heydt then moved to Ebert's property.

Von Heydt transferred $110,000 from the condo sale into a joint account she opened with Ebert. Ebert used money from the joint account to purchase a "tiny house" for von Heydt. She placed it on the Kent property and von Heydt lived there for the next year and a half. Von Heydt also transferred her cash savings of $25,000 into the joint account and another $90,000 she received as a payout from an investment with David.^[5] Von Heydt eventually added $10,000 she received from a different investment. By July 2014, von Heydt had deposited $235,000 into the joint account to benefit TDH.

Ebert testified that the money von Heydt gave her for the benefit of TDH was not an investment but a loan. Ebert said the original $300,000 loan she secured plus $164,000 of her own money was not enough to cover all the costs of opening TDH so she approached von Heydt for help. Ebert did not formally document the loan from von Heydt. She said, "The only thing that I told my mom is if I can borrow some money I'd pay her back." According to Ebert, von Heydt was "holding" the liquor license until Ebert repaid the loan "whenever it's convenient." Ebert also claimed von Heydt loaned her only $95,000. She testified she "quickly" repaid von Heydt by October 2015 plus interest. Ebert said she paid von Heydt $117,000 that she could "trace" and "at least $18,000 in cash" that she kept track of "all in [her] head." She later testified that she repaid von Heydt a total of $170,000. Ebert also insisted von Heydt did not sell her condominium to invest in TDH. She claimed von Heydt had been dissatisfied with the condo for a long time and wanted to sell it so she could stop paying the property assessments.

TDH opened to the public in September 2014. Shortly after, Ebert accused Barton of stealing money from the business and fired him. Bruers then quit his construction job and began working at TDH. In December 2014, Barton signed over his 10 percent ownership of TDH to Bruers. Meanwhile, relations between von Heydt, Ebert, and Bruers began to deteriorate rapidly. In January 2015, Ebert had von Heydt sign a "Memorandum of Gift" that relinquished her share of TDH to Bruers, giving him 100 percent ownership at no cost.^[6] Von Heydt later claimed she did not read the document before signing. She said she routinely signed paperwork for TDH at Ebert's request without question. Also in January 2015, TDH executed a commercial lease with Ebert Leasing, another company owned solely by Ebert. TDH agreed to pay Ebert Leasing a monthly fee to lease restaurant equipment.

Ebert and Bruers married on February 14, 2016. Von Heydt was realizing life on Ebert's property was not what she expected. And she was not receiving profits from TDH. After Ebert's wedding, von Heydt moved into Ebert's three-bedroom house and Ebert and Bruers moved into the tiny house. Still, von Heydt "didn't like" living in south King County and wanted to move back to Everett.

Things continued to sour between von Heydt, Ebert, and Bruers in 2016. A series of events at the Kent property led to police involvement and mutual restraining orders. The big house lost power, heat, water, and septic services. Von Heydt suspected Ebert and Bruers cut off the services. She had to buy water in gallon jugs for drinking and bathing and had to defecate in toilets lined with plastic bags for two weeks. Von Heydt testified that someone locked the main gate of the property so she could not access it and that she once awoke to Ebert and Bruers outside the house shining flashlights into her room. Von Heydt testified that Ebert threatened her and yelled obscenities. She described the experience as a "nightmare."

In January 2017, Ebert's brother Stacy Hatch arrived at the big house to help von Heydt. He said the conditions were so bad that they "had to leave." Von Heydt withdrew $129,000 from the joint bank account she shared with Ebert and left the Kent property for good in February 2017. She used the money to buy a new condominium in Everett. But because market values had increased between 2014 and 2017, von Heydt could not pay the entire sales price and had to finance her purchase with a mortgage of $55,000. Von Heydt testified that Ebert's actions depleted her assets, essentially leaving her financially destitute.^[7]

In September 2018, von Heydt sued Ebert and Bruers. In November 2019, she amended the complaint to include several allegations, including breach of contract as to Ebert, fraud as to Ebert and Bruers, unjust enrichment as to Ebert and Bruers, breach of fiduciary duty as to Ebert, and intentional infliction of emotional distress as to Ebert and Bruers. Von Heydt sought damages for lost profits from TDH, emotional distress, and other costs associated with Ebert's breach of her promises. She also sought attorney fees and costs. Ebert and Bruers alleged counterclaims for breach of fiduciary duty and conversion and sought damages, attorney fees, and costs.^[8] In July 2020, Ebert and Bruers moved for summary judgment dismissal of von Heydt's complaint. The trial court denied the motion, finding "genuine issues of material fact" precluded summary judgment.

Trial began in November 2020. Ebert argued TDH had no profits from 2014 to 2018. But von Heydt presented testimony from certified public accountant (CPA) David Beail to show that Ebert had artificially depleted TDH's accounts. The evidence showed that Ebert, through MRAE, increased TDH's rent from $5,000 per month in 2014 to $10,000 per month in 2015 even though the original lease agreement was for five years. TDH also began paying Ebert Leasing $420...