In re Marriage of Van De Graaf
| Decision Date | 29 August 2019 |
| Docket Number | No. 35133-5-III,35133-5-III |
| Parties | In the Matter of the Marriage of, LORI VAN DE GRAAF, Respondent, v. ROD D. VAN DE GRAAF, Appellant. |
| Court | Court of Appeals of Washington |
In the Matter of the Marriage of, LORI VAN DE GRAAF, Respondent,
v.
ROD D. VAN DE GRAAF, Appellant.
No. 35133-5-III
COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE
August 29, 2019
UNPUBLISHED OPINION
KORSMO, J. —
This motto, adopted by Americans in the wake of the XYZ Affair,1 apparently also was adopted by appellant Rod Van de Graaf in the wake of Lori Van de Graaf's filing for dissolution of the couple's 26-year marriage. The difference in historical outcome—American resolve to live by its principles led to a treaty with the revolutionary French government, while Mr. Van de Graaf's resolve to fight turned this matter into an extended campaign of scorched earth practices—reflects the differences between resolve practiced by a defender and resolve shown by an aggressor. We largely affirm the trial
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court's dissolution decree and award respondent Lori Van de Graaf her attorney fees in this appeal.2
To date, the decree has spawned seven appeals, which we have grouped into four. This case, Van de Graaf I, is the substantive appeal from the decree of dissolution. Van de Graaf II involves appeals from trial court orders awarding suit money to Lori. Van de Graaf III is an appeal from an order changing title to real property awarded to Lori. Van de Graaf IV primarily involves appeals from contempt rulings related to the enforcement of the decree and the suit money awards. These cases also include an extensive number of motions before our commissioner, few of which are relevant to this opinion. Originally, the contempt cases were consolidated with this appeal from the dissolution decree, but our commissioner later severed the contempt cases and grouped them together. One result of the reconfiguration is that briefing was completed on some of those rulings when they were consolidated with this case and others originally were not briefed at all due to a stay. Since all of the briefing is now in, we will regroup some of the issues in different configurations than our commissioner did.
This appeal presents eleven issues, which we primarily address in the order raised by the parties. First, however, we turn to a discussion of the facts related to the marriage
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and family businesses, before looking at the trial rulings and subsequent procedural history of this case. Then we will consider the issues presented by this appeal.
Rod and Lori wed in 1985. He was 27 and she was 24. The couple have four sons who were born between 1986 and 1996. Lori has a bachelor's degree and a teaching certificate. She taught full-time for one year prior to the birth of her eldest son. Since that point she has raised the four children and, later, returned to the classroom as a part-time substitute teacher.
Rod worked as a salaried employee for his family's cattle business, Van De Graaf Ranches (VDGR). The business was founded by his parents, Dick and Maxine Van de Graaf. All three of their children—Rod, Karen, and Rick—worked for VDGR. VDGR is a major cattle operation and owns stockyards and feedlots. Van de Graaf Ranch Properties, a related business, leases land for cattle grazing. In addition, the three children formed various partnerships related to the cattle business that engaged in joint ventures with VDGR. The most significant of those partnerships for purposes of this case was Midvale Cattle Company.
Midvale was created by the three siblings in 1991 as a general partnership, with each of them holding a one-third interest.3 Midvale operated a cattle raising business and
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leased feedlots and grazing land from their parents' companies. Each of the three siblings borrowed $2 million from VDGR to capitalize Midvale. Lori and Rod jointly executed a $2 million promissory note to VDGR. The note was secured by the couple's interest in Midvale and other personal assets.
The original $2 million promissory note called for semi-annual interest payments and three equal principal payments due in 1995, 2000, and 2005. The note was amended in 1993 to adjust the interest rate, and again in 1995 to extend the principal payment due dates to 2000, 2005, and 2010. Rod and Lori missed the scheduled principal payments, but they did regularly pay interest on the note. Other than $350,000 Rick paid directly to Dick in 1991 when Dick threatened to "recall" Rick's note following a family dispute, none of the siblings ever paid any principal on their individual notes.
Midvale took over many of VDGR's operations after Dick retired. VDGR gives Midvale favorable terms in the joint business ventures, paying Midvale to manage VDGR land and allowing Midvale to use the land for its cattle business as well as lease the land to others. VDGR pays management fees to Midvale and allows Midvale to keep rents collected for leasing out the VDGR lands. Midvale's owners received "guaranteed payments" on a bi-weekly basis that netted each $3,846. Midvale also paid health insurance for the entire family and made additional distributions "as needed." The company also paid all of the family's vehicle expenses and wrote off, as business expenses, Rod's hunting trips.
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Rod and Rick jointly purchased 342 acres of pasture land near Ellensburg from their parents in 1977. They purchased the land for $120,000. The brothers paid $100 down and agreed to pay the balance, with interest, at $4,800 annually. When Rod and Lori married in 1985, he still owed nearly $51,000 of his $60,000 share of the purchase price. The balance was paid off in 2004. The brothers leased the land to VDGR for cattle grazing and used the income from the lease to pay property taxes and water usage.
Prior to Rod's marriage, his parents had created a "cattle account" for him. That account allowed him to buy and sell cattle for his own personal profit separate from VDGR. After his marriage to Lori, he continued his salaried employment with VDGR and also continued to operate the cattle account. By 1989, the cattle account had accumulated profits of nearly $1.4 million.
The couple used the cattle account profits to build a luxurious home. The family home was described at trial as "massive, well appointed, draped with trophy mounts from [Rod]'s many hunting trips, and featured an indoor pool and Persian carpets." The couple separated in 2011 when Rod moved out that July. He then lived rent free in another house owned by VDGR with his girlfriend and her family.
In 2012, the senior Van de Graafs created an estate plan to transfer 30 percent interests in VDGR to Rick and Karen, but not to Rod. Through a combination of loans and gifts, the parents transferred 90 percent of the VDGR stock in equal shares to Rick, Karen, and a newly created "Maxine Van de Graaf 2012 Family Trust." Dick was the
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grantor of the 2012 trust, while Maxine was the beneficiary and trustee. Rod was a "permissible beneficiary" and the first alternate trustee.
For estate tax purposes, VDGR was given a discounted value of $5.71 million, with the 90 percent transferred to Rick, Karen, and the 2012 trust valued at $5.1 million. Rick, Karen, and the 2012 trust each borrowed $833,333 from VDGR to acquire their 30 percent interests. For that sum, which was considered the "sold interest"4 in VDGR, the purchasers acquired 1,500 shares of nonvoting common stock in the company. The purchase was financed by royalties received from the sale of manure that Midvale processes and sells. For the 20 years prior to the estate plan, the manure had been sold by Midvale without payment of royalties to VDGR and had earned the partnership up to $1,000,000 annually.
Rod and Lori had set up "529 education accounts" for their four sons. The couple's youngest son, N.V.D.G., was 20 and had completed his sophomore year at Washington State University at the time of trial. Rod had also created a uniform gift to minor account (UGTMA) for the boy. At trial, the boy and his mother testified that the UGTMA was not intended to pay for college and that the 529 education account had been exhausted. He was using the 529 account of an older brother who had not completed
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college. Rod testified that N.V.D.G. had $123,000 available to him between the two accounts.
Lori filed for dissolution of the marriage on October 7, 2011. The following July, the trial court entered temporary payment orders requiring Rod to pay Lori $3,000 per month in maintenance plus an additional $1,500 per month to cover utilities and other expenses. Lori remained in the house pending trial.
After extensive pretrial proceedings, a five-day dissolution trial began on September 27, 2016. There was conflicting evidence entered on a number of financial issues. The court entered findings of fact and/or conclusions of law on the following topics germane to this appeal.
Rejecting Rod's argument that Lori had no need for maintenance and/or could return to full time teaching, the court directed that Rod pay Lori spousal maintenance of $6,000 per month until one or the other died. The court also directed that N.V.D.G. and each parent pay one-third of any college expenses not covered by the child's 529 account.
The court valued the couple's share of Midvale at $2 million dollars, choosing a valuation midway between Lori's expert's opinion of $2.2 million and Rod's expert's valuation of $1.7 million.5 The court concluded that the $2 million promissory note the
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couple had signed was illusory and did not devalue their share of the company.6 The court valued the residence at $1.4 million in accordance with the valuation of Lori's real estate agent; Rod had valued the home at $772,000. The court determined that the cattle account funds had been comingled with community funds and characterized both the house and the cattle account as community property. Turning to the Ellensburg property, the court ruled that it constituted community property since the bulk of the payments came from community assets.
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