Appeal from the Probate Court of Cook County; the Hon. PAUL M.
WRIGHT, Judge, presiding. Affirmed.
MR. PRESIDING JUSTICE MURPHY DELIVERED THE OPINION OF THE COURT.
Respondent, Ward E. Guest, executor of the estate of Estelle J. Guest, deceased, appeals from an order of the Probate Court, which directs that petitioners, Escha J. Jinnette and Clara J. Walker, are to receive shares of stock, bequeathed to them by the decedent, free and clear of any liability for federal estate tax.
The decedent, Estelle J. Guest, died testate on October 14, 1959. Her will was admitted to probate on October 30, 1959, and letters testamentary were issued to respondent, Ward Earl Guest, her husband.
The principal asset of the estate, a block of 2,220 shares of the common stock of D.O. James Manufacturing Co. (hereafter referred to as the Company), a closely held family corporation, was bequeathed, in equal shares, to Escha J. Jinnette and Clara J. Walker, surviving sisters of decedent. The balance of the estate, consisting of a parcel of real estate and some personalty, was left to respondent. The will directed that all inheritance and estate taxes be charged proportionately against the bequest to each sister.
The decedent, Estelle J. Guest, and her sisters, Vivien James, Escha J. Jinnette and Clara J. Walker, were the surviving daughters of D.O. James, the founder of the Company. In 1937, the combined shareholdings of decedent and her sisters represented the controlling interest in the Company. In 1937, only two of the sisters were married, Escha J. Jinnette and Clara J. Walker. On December 9, 1937, the decedent and her sisters entered into a written agreement providing for the possible sale of the stock and its disposition on the death of a sister. The agreement provided that if any sister should thereafter desire to sell any of her stock, she should first give the other sisters the right to purchase any or all of the shares.
The agreement further provided: "Each of the Sisters shall, upon her death, by her last will and testament, give and bequeath all shares of the Company which she may own at her death, in equal shares, to the surviving Sisters or Sister, if any, then owning any shares of stock in the Company, in absolute ownership," subject to a condition that the surviving husband of any sister would be entitled for life to the income from his deceased wife's shares, or to half the proceeds if the shares should be sold or the Company liquidated, "and after the death of such surviving Husband, said shares shall be owned by said surviving Sisters absolutely, free from any charge or encumbrance, . . . ."
In 1943, decedent married respondent, Ward Earl Guest. Thereafter decedent and respondent entered into a supplemental agreement dated April 24, 1943. Decedent agreed that if respondent survived her, he should receive all income from all shares of the Company standing in her name at the time of her death, subject to disposition of the shares at his death as provided in the agreement of December 9, 1937. Respondent agreed that he would not claim any interest in the shares of the Company "other than the right to receive the income therefrom" after decedent's death. Respondent further agreed that "each and all of the terms of said agreement of December 9, 1937, shall become and remain binding upon him, so far as the same are applicable."
On December 14, 1960, the Superior Court of Cook County, in a declaratory judgment action filed by respondent, entered a decree that the agreement of December 9, 1937, as supplemented, was valid and enforceable according to its terms and confirmed the rights of petitioners and respondent in the stock under the agreement.
On December 20, 1960, decedent's sisters, Escha J. Jinnette and Clara J. Walker, filed a petition in the Probate Court, which alleges the written agreement of December 9, 1937; that the agreement had been found valid and enforceable in the Superior Court of Cook County; that the provision of decedent's will, attempting to impose liability on petitioners for a portion of the federal estate tax due from her estate, violated the 1937 agreement and should be construed to be of no force and effect.
Respondent answered the petition, asserting that the provision as to estate taxes in decedent's will was valid; that it was not the intention of any of the parties to the 1937 agreement that the surviving sisters should take the Company stock free and clear of federal estate tax charges; that the residuary estate left to him would be completely eliminated by estate taxes if petitioners' theory were sustained; and that the only asset of consequence, other than the Company stock, was the house now resided in by respondent.
The Probate Court found that the will of decedent violates the 1937 agreement, in that it attempts to impose liability on petitioners for part of any federal estate tax that may be due from the estate of decedent. The court ordered distribution to petitioners of all the Company stock, "free and clear of any liability for federal estate tax." This is the order from which respondent appeals.
Respondent contends that the will clearly provides that petitioners are to pay their proportionate share of the federal estate tax; that the contract to dispose of the stock by will is silent as to the responsibility for paying the taxes; and the Probate Court erred in the entry of the instant order.
Petitioners, not disputing that decedent's will directs the estate tax be charged proportionately against them, contend that the rights of the parties, including the lifetime rights of respondent, are governed by the agreement and not by the will, and that the agreement provides that none of the federal estate tax in decedent's estate may be charged to petitioners. Therefore, the decisive ...