Ver Brycke v. Ver Brycke

Decision Date27 March 2003
Docket NumberNo. 1953,1953
Citation822 A.2d 1226,150 Md. App. 623
PartiesLisa VER BRYCKE v. J. Russell VER BRYCKE, III, et al.
CourtCourt of Special Appeals of Maryland

J. Thomas Giunta, (William F. Jones, Annapolis, and Leonard G. Ross, Jr., on the brief), Gaithersburg, for appellant.

Timothy E. Meredith (Warfield, Meredith & Darrah, P.C., on the brief), Severna Park, for appellees.

Argued before DAVIS, ADKINS and SHARER, JJ.

ADKINS, Judge.

In 1992, John R. Ver Brycke, III and Barbara Ver Brycke ("the Ver Bryckes"), appellees/cross-appellants, transferred $200,000 to their son, John R. Ver Brycke, IV ("John"), and his then wife, Lisa May Feehley Ver Brycke ("Lisa"), appellant/cross-appellee. In an effort to establish a sort of "family compound," the Ver Bryckes advanced these funds to help John and Lisa buy a home known as "Rabbit Hill," which is next door to the Ver Bryckes' home on the Severn River. John and Lisa ultimately separated five years later, in August 1997. They divorced in October 2000, never having lived in the Rabbit Hill home.

The Ver Bryckes and Lisa dispute the nature and legal effect of this $200,000 transaction. When Lisa and John sold Rabbit Hill, the Ver Bryckes made a demand for the $200,000 plus interest, which Lisa rejected on the ground that the $200,000 was a gift. A jury in the Circuit Court for Anne Arundel County found by special verdict that the Ver Bryckes had given John and Lisa a conditional gift of $200,000, the condition being that Lisa and John would actually live in the Rabbit Hill home, with their children, and help care for the Ver Bryckes. The jury also found that Lisa and John were unjustly enriched by the transaction, and that they were equitably estopped from retaining the gift. It awarded the Ver Bryckes $200,000 under these theories of recovery.

The jury also found, however, that the Ver Bryckes "were ... aware that the conditions [of their conditional gift] would not be satisfied on or before January 1, 1995[.]" After the court ordered judgment in favor of the Ver Bryckes for the entire $200,000, Lisa moved for judgment notwithstanding the verdict, arguing that the Ver Bryckes were barred by the statute of limitations from recovering. The trial court denied this motion without a hearing or a written opinion. Both parties appeal the resulting judgment.

Lisa raises the following questions for our review:

I. Did the jury find that the applicable statute of limitations has run, so that the trial court erred in allowing recovery by the Ver Bryckes?
II. Was the jury's finding that the $200,000 was a conditional gift supported by the evidence?

The Ver Bryckes ask us to decide these additional issues:

III. Did the trial court err in failing to force Lisa and John to disgorge profits from the sale of Rabbit Hill when the jury found that the "benefit" constituting the unjust enrichment was merely the $200,000 initial amount?
IV. Were the Ver Bryckes entitled to prejudgment interest as a matter of right?

Because the Ver Bryckes failed to file suit within three years of knowing that Lisa and John would not satisfy the condition that they live at Rabbit Hill, we hold that their claim was partially barred by the statute of limitations. The bar of the statute is limited, however, to $40,000 of the $200,000 gift, because that amount was unsecured. With respect to the $160,000 balance of the conditional gift that was subject to a deed of trust, the 12 year statute of limitations applied, and the Ver Bryckes' principal claim in this amount was not time-barred. We also hold that the jury's finding that there was a conditional gift is supported by the evidence. Regarding the Ver Bryckes' cross-appeal, we hold that the Ver Bryckes are not entitled to disgorgement of profits or prejudgment interest as a matter of right.

FACTS AND LEGAL PROCEEDINGS
Lisa and John's Purchase Of Rabbit Hill

After meeting while both were in the Navy, Lisa and John married in April 1981. In 1986, they moved to Tennessee. In the early 1980's, John noticed the Rabbit Hill property when he made his first visit to his parents' new Annapolis home, which was next door to Rabbit Hill. The resident of Rabbit Hill was an older woman. When she died in 1992, John asked his father to inquire about what was going to happen to the property.

Learning that Rabbit Hill was to be sold, John and Lisa considered buying the property. Lisa explained that they calculated how much money they would be "comfortable spending on a mortgage and still [be] able to keep our kids in a private school, and we came up with ... $350,000," $300,000 of which would be financed. The property, however, had a significantly higher value, in the range of $750,000. In order to make the purchase, John and Lisa needed financial help from other members of the Ver Brycke family.

The property featured both the main house and a two-bedroom guest house. According to John,

after we figured we knew what the price was going to be then we went into a—I went into a mortgage search mode trying to find the best financing, and we did.... I came up with a figure of 350-for me, 200-for my sister, and 200-for [my parents].

John's sister, Pamela Ver Brycke, agreed to contribute $200,000 toward the purchase, in exchange for the right to purchase the guest house for rental income.1 The Ver Bryckes agreed to advance John and Lisa the remaining $200,000. It is the parents' $200,000 transfer—or more specifically, the nature of that transaction— that eventually resulted in this litigation.

After their offer was accepted, the Ver Bryckes proceeded to make the financial arrangements necessary to complete the purchase. The Ver Bryckes took out a mortgage on their own home to finance their $200,000 contribution toward the purchase of Rabbit Hill. On August 10, 1992, Mr. Ver Brycke signed a "gift letter" stating:

I, John R. Ver Brycke III ... will give (or have given) [John Ver Brycke, IV] a gift of $200,000.00 .... and there is no obligation expressed or implied either in the form of cash or future services, to repay this sum at any time. These funds are available and will be given (or have been given) to: John Ver Brycke IV in time to close the mortgage transaction on the purchase of his ... home.

Mr. Ver Brycke also consulted his estate planning attorney. In a September 11, 1992 letter, Ronald Holden summarized the proposed transaction.2

You have asked me to summarize the substance of my recommendations concerning your desire to make a gift of $200,000.00 unto your son and his wife by use of the annual $10,000.00 gifting rule. As you are aware, each of you as individuals is permitted to give up to $10,000.00 per calendar year unto any number of individuals. Thus, each of you may give $10,000.00 per year unto John and $10,000.00 per year unto his wife, Lisa. This represents a total of $40,000.00 per year.

You expressed the desire that in making the proposed gift/loan gift of $200,000.00 you did not want to use up any of your $600,000.00 unified credit (which is available under Federal Gift Tax Laws). During our meeting, I cautioned that if you were to set up a situation whereby John signed a $200,000 note and religiously, each calendar year, you forgave $40,000.00 of such note, there is a risk that the IRS will take the position that the entire gift of $200,000.00 was made in 1992 versus being made in increments of $40,000.00. I advised that this risk is even greater if your son and his wife did not make the customary interest and principal payment expected in [a]rms length mortgage transactions. You stated that notwithstanding the above potential risk, you would like to proceed to attempt to qualify the gifts as being made in $40,000.00 increments.

Based upon the above objective I have recommended to you the following:

1.) On settlement day, I recommend that each of you write over your separate signatures a $10,000.00 check to John and each of you write over separate signatures a $10,000.00 check to Lisa....

2.) On settlement day, instruct [settlement agents] Feldman and Bernstein to prepare for you a $160,000.00 mortgage note to be signed by John and Lisa....
3.) In January of 1993 and each subsequent year thereafter, you will plan to forgive $40,000.00 of the debt.
4.) John and Lisa should make regular mortgage payments to you each month, beginning November 1st.

The Rabbit Hill settlement took place on September 30, 1992. The Ver Bryckes followed many of Holden's recommendations. Before the closing date, the Ver Bryckes deposited $160,000 into an escrow account at the title company that was handling the Rabbit Hill transaction. At closing, that money was applied toward the purchase price. The remaining $40,000 that the Ver Bryckes committed toward settlement was delivered at closing. Mr. and Mrs. Ver Brycke each wrote separate $10,000 checks to Lisa and John, totaling $40,000. John and Lisa immediately endorsed these four checks, and those funds were used to purchase Rabbit Hill.3 Pamela separately paid for and settled on the guest house. John and Lisa borrowed the remaining $300,000 of the $550,000 purchase price from Norwest Mortgage, Inc. ("Norwest").

In exchange for the $200,000 funding, the Ver Bryckes received promissory notes and a second deed of trust on Rabbit Hill. Instead of drawing a single $160,000 promissory note, as Holden contemplated, the Ver Bryckes had Lisa and John sign sixteen individual promissory notes for $10,000, which were easier to individually cancel on an annual basis. John and Lisa also executed in favor of the Ver Bryckes a second deed of trust, which was junior to Norwest's first deed of trust.4

Shortly after settlement, Norwest asked for an acknowledgment that there had been a $200,000 gift to Lisa and John. According to the title company agent who handled the Rabbit Hill settlement, "[t]here was a[n] [August 10, 1992] gift letter saying that there would be a gift, and then [No...

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