SPOKANE — The fate of what could amount to $1 billion of property has been settled by a Spokane court as the children of real estate giant Harlan Douglass fight over their potential inheritance.
One of the sons of Harlan Douglass influenced the ailing developer to move property in defiance of his late wife’s will and diminish the inheritance of his brother, a Spokane judge ruled last month.
The finding followed a five-day bench trial last fall during which witnesses described a longtime power broker in mental decline, whose allegiances to his three children had changed over time. The situation came to a head in summer 2019, as Douglass tried to finalize a property trust created after the death of his wife, Maxine, worth an estimated hundreds of millions of dollars. After a lawsuit was filed challenging how the property was being divided, all three children said they were alienated from their father.
Spokane County Superior Court Judge Raymond Clary, in a decision handed down June 5, found the testimony of Lancze Douglass — that his father wanted control over the property in the trust created after in his wife’s will — not credible because he stood to benefit by hundreds of millions of dollars by influencing his father. That gain in inheritance would be at the expense of his brother, Harley Douglass.
“The scheme was not only shown by the totality of the evidence, but it was clear, convincing, and inescapable,” Clary wrote in his decision.
Clary’s order invalidated a document transferring to Harlan Douglass 224 Spokane County properties from a trust created after the 2016 death of his wife. That transfer would have put the properties in control of limited liability corporations owned by Harlan Douglass, Lancze Douglass and Stacey Douglass Boies, potentially increasing their shares of the inheritance while shutting out Harley Douglass, who was to receive half ownership of the property as part of Maxine Douglass’ will but would get nothing under the new plan.
“My mother would roll over in her grave if she knew this was going on,” Harley Douglass said in testimony last fall.
Steve Hassing, the attorney representing both Harley and Harlan Douglass, said the ruling showed that Lancze Douglass intended to “use his father as nothing more than a vessel” to convert property into his own name, and that it would likely withstand any appeal.
“Those findings are numerous,” Hassing said of the 41-page order, which also awarded Harley Douglass attorney’s fees for the case. “They’re detailed, and there’s no way to get around those findings on an appeal.”
Lancze Douglass’ attorney, Jim McPhee, said last week his client respects the legal process, but “adamantly disagreed with the decision.” He plans to file an appeal, and in court filings argued that Harley Douglass’ lawsuit was filed after his own relationship with his father soured as Lancze Douglass and Stacey Douglass Boies became closer to him. That included Harlan Douglass giving Stacey Douglass Boies a boat that he’d demanded Harley Douglass return to him in December 2018, according to court records, and a request by Harlan Douglass in writing for Harley Douglass to surrender a 49% share in his father’s company in early 2019.
A specific value of the Douglass estate is not listed in court documents, as some of the properties had yet to be appraised by the time the court case commenced. It’s estimated by Clary to range between $500 million and $1 billion, though that includes property in five states. Only the properties the family owns in Spokane County are subject to Clary’s finding.
Clary’s decision leaves in place a division of the inheritance that was included in Maxine Douglass’ will, finalized in 2008. She and Harlan Douglass each owned half of their estate, and on her death, the will states that her property should be placed in a trust. When Harlan Douglass dies, the trust is to be given to the couple’s three children, according to the will, with Harley Douglass receiving half, Stacey Douglass Boies receiving 40% and Lancze Douglass receiving 10%. Harlan Douglass has his own will, which has been sealed until his death, and the family is also in a legal dispute over who has power of attorney for Harlan Douglass.
Maxine Douglass’ will designated family friend and business partner Thomas Hamilton as a special trustee who was given authority to administer the trust. Harlan and Maxine Douglass’ longtime attorney who’d helped draft the 2008 will, Joseph Delay, died in May 2019.
Harlan Douglass hired Mike Murphy, Lancze Douglass’ attorney, to finish handling the transition of Maxine Douglass’ property into the trust. Murphy had also represented Harlan Douglass in several dozen legal matters dating to the early 2000s.
Murphy wrote two letters in support of his hiring, including a letter of instructions that appeared to have been written as a letter to Murphy authored by Harlan Douglass. It was later printed on Harlan Douglass’ letterhead, and the developer signed it. Clary wrote in his ruling Lancze Douglass’ plan included “certain staged documents,” but did not specifically identify Murphy’s letter as one of them.
Murphy said in a brief phone call last week he needed to receive permission from his clients before answering questions. He did not call back by press time.
Harlan Douglass’ attorney, Deanna Malcolm, worked with him in summer 2019 as the deeds were prepared and testified that his mental well-being and memory were in decline. She described an incident that summer when she’d told Harlan Douglass to go to an office about 15 to 20 feet away, and that Harlan Douglass became lost on the way.
“We both just cried,” Malcolm said. “He was really scared, and so was I at that point. I had never seen him get lost in the office before.”
Lancze Douglass and Stacey Douglass Boies testified that he was sharp that summer when they visited him in California, and could understand business discussions.
In August, Lancze Douglass, Harlan Douglass, Hamilton and Malcolm met in Spokane. Hamilton was told he was the special trustee in the will, and Lancze Douglass said his dad wanted the trust properties moved to Harlan Douglass’ individual ownership. A third deed had been drawn up to do that, and Hamilton signed it.
Almost immediately, according to court testimony, Malcolm and Hamilton grew suspicious. Harley Douglass learned of the new deed through an anonymous phone call, and on Aug. 29, Hassing filed a lawsuit on Harley Douglass’ behalf seeking to nullify the deed and alleged fraud.
Hassing also represents Harlan Douglass, which meant he had to phone the father in California to seek permission for Harley Douglass to sue Lancze Douglass and Hamilton as the trustee.
“I couldn’t file a lawsuit that takes $200 million of property away from him, without his OK, because he’s my client,” Hassing said. “At that point, his mind was such that he didn’t remember being at that meeting.”
Harlan Douglass was not deposed and did not testify in the trial because of his mental state, Hassing said.
Lancze Douglass, in court testimony last fall, said that after his brother filed the lawsuit, his father “became isolated from everybody.” He argued that the plan to split up the trust properties into corporations would save his father money in taxes and “equalize the distribution of the family wealth to offset the previous allocations to Harley and more fairly allocate his estate among his children.”
“We weren’t able to talk to him to have him drive the ship, as it may, to keep it going forward,” Lancze Douglass said under questioning.
His sister later said she tried to visit her dad in California and was kept outside for an hour and a half by security before being allowed to see him.
Lancze Douglass also said he wasn’t upset that his portion of the inheritance from the trust was just 10%, compared to his brother’s 50% and his sister’s 40%.
“I was grateful to get anything out of it because I was always raised that we weren’t going to get anything, and if that if we were ever going to amount to anything or accumulate anything in this life, we had to earn it ourselves and not be waiting for mom and daddy to give us money,” Lancze Douglass testified.
The testimony of Lancze Douglass, that his father wanted the transfer, was not credible “both because of his interest in the deed and because of his demeanor at trial and actions following the Aug. 14, 2019, deed demonstrate that the deed was part of his plan to gain $200 million dollars, plus or minus,” Clary wrote.
Clary found that Harlan Douglass was “senior and frail of mind” when he signed the deed that transferred 224 Spokane County properties from the trust. Clary also found that Harlan Douglass took no actual steps to treat the properties as his own, rather than in the trust, indicating he did not want the transfer.
The discord in the family has occasionally spilled into the public eye. In October 2012, Lancze Douglass accused his brother of fraud as part of a legal dispute with Spokane County over an out-of-court settlement in a case involving permitting of a Mead-area housing project the siblings were involved in together. Harley Douglass had sued his brother and sister to recover the full amount of the settlement, $685,000. The case was settled out of court in December 2013, according to court records.
Harlan Douglass has also been the target of theft. His former personal assistant, Bryan J. Reilly, pleaded guilty in May 2019 to stealing jewelry, watches and hundreds of thousands of dollars in cash from the developer. He was sentenced to two days in jail. Harlan Douglass also filed a lawsuit against a former chief executive of his property management company in 2018, alleging she embezzled from him. The case was settled out of court, according to court records.
A hearing is scheduled in Spokane County Superior Court on Aug. 25 to determine the attorney fees.
