In re Schwindt

• Decision Date: 22 February 2018
• Docket Number: A159486
• Parties: In the MATTER OF the MARRIAGE OF Bianca Joy SCHWINDT, Petitioner-Respondent, and Douglas Andrew Schwindt, Respondent-Appellant.
• Court: Oregon Court of Appeals

290 Or.App. 357

414 P.3d 859

In the MATTER OF the MARRIAGE OF Bianca Joy SCHWINDT, Petitioner-Respondent, and Douglas Andrew Schwindt, Respondent-Appellant.

A159486

Court of Appeals of Oregon, En Banc.

Argued and submitted December 1, 2016;

resubmitted en banc November 20, 2017.

February 22, 2018

Helen C. Tompkins, Lake Oswego, argued the cause and filed the briefs for appellant.

Adam J. Brittle, Portland, argued the cause for respondent. On the brief were Jill E. Brittle and Brittle & Brittle, PC.

Before Egan, Chief Judge, and Armstrong, Ortega, Hadlock, DeVore, Lagesen, Tookey, Garrett, DeHoog, Shorr, James, Aoyagi, and Powers, Judges.

GARRETT, J.

In this appeal of a judgment dissolving his marriage to wife, husband challenges, among other things, the trial court's property division. At the center of his appeal is the court's treatment of a family-owned restaurant business, Expressway Restaurant Holdings, Inc. (Expressway), which supported the parties' lifestyle during the marriage. According to husband, his stock in Expressway, although acquired during the marriage, was gifted to him alone by his parents and should not have been divided equally. We are not persuaded that the trial court erred by dividing the property as it did on this record, and we therefore affirm the dissolution judgment.¹

Before describing the background of this case, we note that husband does not seek de novo review, ORS 19.415(3), nor is such a review warranted. See ORAP 5.40 (8)(c) (explaining that this court will exercise de novo review only in exceptional cases). Consequently, we are "bound by the trial court's express and implicit factual findings if they are supported by any evidence in the record." Morton and Morton , 252 Or. App. 525, 527, 287 P.3d 1227 (2012). As we will later discuss, the trial court expressly found husband not credible, and the court rejected husband's parents' version of events when it ruled in wife's favor—an implicit determination that their description of events was not credible—at least with regard to their donative intent. We state the following facts in accordance with those express and implicit credibility determinations.²

Husband and wife began living together in 2004, and they had a son in early 2006. They subsequently married in August 2006, when their son was six months old.

At the time they married, husband worked as an employee of Expressway, a corporation then-owned in equal shares by his parents, Alex Schwindt and Deborah Schwindt (the Schwindts). Expressway was the parent company for the Schwindts' McDonald's franchise restaurant holdings. The Schwindts acquired their first McDonald's restaurant in 1991, located in Milwaukie; acquired a second in Oak Grove in 1994; and then acquired a third in Clackamette Park in 2000. Generally speaking, Alex Schwindt operated the franchises, and Deborah Schwindt handled the accounting and bookkeeping.

Husband had worked periodically at his parents' McDonald's franchises as a teenager in the early 1990s, and returned in 2002 as a manager trainee and entered the McDonald's "Next Generation" program, a program that prepares children of owner-operators to take over family-run McDonald's franchises. Husband worked as a "swing manager," salaried manager, general manager, and then supervisor. However, to be an "approved operator" under the Next Generation program, a candidate must hold "a majority of shares in the parents' organization," and "in order to begin the process, you'd need to have a 20 percent minimum ownership." Thus, for husband to take over as an operator of his parents' business, it was necessary for him to become a shareholder.

From the very beginning of husband and wife's marriage, they had discussions with Alex Schwindt about "buying the business." The family was "constantly trying to figure out how we were going to do this and how much money had to be paid and how it was going to take place and how could we avoid as many taxes as possible." It was a "constant conversation" in the family.

In 2006, the Schwindts consulted an accountant, Chuck Hallett of the firm Strader Hallett, to consider how to convey ownership of the family business to husband. The Schwindts had considered the possibility of husband purchasing Expressway stock, but they knew that husband did not have sufficient cash reserves to make a purchase. Additionally, Hallett urged them to transfer the stock to husband by gift for tax reasons, among others. Thus, the Schwindts, with the help of Strader Hallett, "explored sales, [ ] explored gifting, [and] explored combinations of both. And at the end of the day, the gift scenario appeared to be the best match."

On December 31, 2006, and January 1, 2007, the Schwindts began that gifting process by transferring shares of Expressway to husband, in his name alone, such that he became a 49.9 percent shareholder of the company, with the Schwindts retaining 50.1 percent. Strader Hallett prepared gift tax returns for the Schwindts reflecting those transfers.

In the years that followed, Expressway was the primary source of husband and wife's family income. Husband's salary from the business rose steadily from around $57,000 in 2007 to approximately $93,000 in 2013. In addition, the parties used business accounts to pay for personal expenses throughout the marriage, including such things as their son's Montessori school tuition. Another accountant from Strader Hallet, Richard Hall, estimated the personal expenses paid through the business to be approximately $2,000 per month. Husband took significant draws from the company—more than $500,000 between 2008 and 2014.

Wife, too, became involved in the family business. Before their marriage, wife had been employed as a receptionist and real estate assistant for a real estate company, with the prospect of becoming a real estate broker. After their son was born, wife instead learned bookkeeping skills and began working for Expressway, handling some of the same duties that had been performed by Deborah Schwindt. With that arrangement—wife staying home with their son and handling office responsibilities such as payroll and profit-sharing—husband was able to travel, attend meetings, and otherwise run operations for the restaurants.

Wife's initial salary was around $10,000 in 2007, and rose to approximately $40,000 by 2012, as she took over more duties. Wife's salary was kept lower for tax reasons, with the understanding that husband's and wife's income were all "going to the same place."³

Meanwhile, Alex Schwindt continued to receive a salary from Expressway, continued to run personal expenses through the business, and continued to take significant draws from the business. Payments from the business to Alex Schwindt were documented in ways that were designed to minimize tax consequences. For instance, on one occasion, husband's father received a $50,000 "loan" from Expressway, which he was not expected to pay back.

In 2010, Alex and Deborah Schwindt divorced. As part of their divorce, Deborah transferred all of her shares to Alex, which resulted in Alex owning the majority share of the company. In exchange, Deborah Schwindt received a 10-year employment contract with Expressway, requiring the company to pay her $75,000 per year, notwithstanding the fact that she did not have an active role in the company after the divorce and had transferred all of her accounting duties to wife.

By 2012, Alex Schwindt had moved to the Oregon Coast, and husband and wife were essentially running the business. As they had throughout the years after the initial share transfers, the family continued to have discussions about how much to pay Alex Schwindt to "retire" him from the business. Wife, in particular, was frustrated with the fact that Alex Schwindt "kept wanting more and more money. And he didn't seem to understand that the business wasn't responsible for his debt and what he was paying to [Deborah Schwindt]."

By the summer of 2012, husband and his father appeared to be close to finalizing the terms of transferring the business to husband. Expressway sold one of its restaurants—Clackamette Park—for a little more than $1 million. According to husband, after liquidating liabilities of that restaurant, the remaining proceeds of the sale were approximately $800,000. On June 5, 2012, husband sent his father an email outlining a proposal:

"Here is what I propose.

"As you asked for I would like to write you a check for $400,000.00 along with the other things we discussed to get to the total you said was the total you would be happy with to retire and enjoy the next chapter of your life. Upon acceptance I will receive the balance of the stock shares (less 1% due in December 2012). After this the company will no longer be paying any of your executive expenses including and not limited to

"BMW payment[;] Any auto insurance[;] Company credit card (you have a balance of $12,900.00 from home building expenses we have been paying interest only on as you requested)[;] Dish network[;] Health insurance[;] Century link internet [;] Cell phone[;] Or any incidental occurring costs."

(Spacing altered.)

On June 19, 2012, husband sent Hall a letter stating, "Here is where we are. We have executed the gift letter. (Alex has been funded) Prior to this, Alex received a check for $400K[.] At this same time I received a check for [$]180K. I still have some distribution to go to be even. (Keep [in] mind out of the Clackamette park $ I spent $120k to pay off some debt. I can recode this to whatever to move forward.)."

According to husband, as part of the terms of the buyout, his father ultimately received $520,000 "in cash and in gift" from husband after the sale of the Clackamette property—essentially all of the proceeds of the sale after the tax liability of $280,000. Alex Schwindt's name was removed from business bank accounts, he stopped receiving a salary from the company, and he transferred a small number of shares to husband that reversed their share positions,...