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Douglas's bizarre, shape-shifting talking cat is actually something called a pukis—a "house spirit" (30.104)—that does the bidding of its master and can change into different forms. Sam learns of this as he speaks with his lawyer about Douglas's estate, including the unsettling detail that Douglas's body vanished and that "It wouldn't be out of character for it to steal the body" (30.105). Enjoy bumping into Douglas's corpse.
Douglas's relationship with James is indeed pretty bizarre. "James was the only one he could relax in front of," Douglas reflects. "The only one he trusted. It was a rare feeling and he valued it" (18.28). It simultaneously says a lot about Douglas that the only entity he can trust is a talking cat that sometimes transforms into a tiny flying dragon—and it doesn't reflect well on James either.