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Horwitz v. Ritholz

OPINION FILED JUNE 19, 1984.

DONALD P. HORWITZ, COTRUSTEE OF THE LORELEI P. RITHOLZ TRUST, ET AL., PLAINTIFFS-APPELLANTS,

v.

SYLVIA RITHOLZ, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County; the Hon. Richard L. Curry, Judge, presiding.

JUSTICE PERLIN DELIVERED THE OPINION OF THE COURT:

Plaintiffs Donald Horwitz and Norman Newman, co-trustees of the Lorelei P. Ritholz Trust (Trust), brought an action for an accounting and distribution of the interest of the Trust in the Sylvia Ritholz Limited Partnership (Partnership). Defendant Sylvia Ritholz, general partner of the Partnership, contends that the Trust had already received a full accounting and had refused to accept its share of the final partnership distribution.

The sole asset of the Partnership consisted of an interest in a Canadian enterprise, King Optical Company, which originally was an asset of the estate of Samuel Ritholz. Samuel Ritholz, who died in 1971, was the husband of defendant and the father of Richard Ritholz and Gerald Ritholz. Samuel Ritholz' will, admitted to probate in 1971, provided that after payment of "all estate, inheritance, succession and transfer taxes, of every nature whatsoever," defendant was to be the sole beneficiary of his estate, "it being the intention hereof that the ultimate burden of all such taxes be borne by my estate."

In April 1972, defendant disclaimed 20 shares of stock in SJS Optical Ltd., a Canadian corporation which operated under the King Optical Company, "in favor of her sons, Richard Ritholz and Gerald Ritholz." Richard and Gerald accepted the stock pursuant to the disclaimer. The effect of the disclaimer was to give Richard and Gerald a partial interest in King Optical Company.

Later in 1972, the Ritholz family decided to dissolve their various Canadian corporations, including SJS Optical Ltd., and to thereafter operate under the King Optical Company Partnership. As a result, Sylvia Ritholz, together with Richard and Gerald, held a direct interest in the Canadian partnership, King Optical Company. In order to protect themselves from "possible [King Optical Company] partnership liability exposure," defendant and her two sons, Richard and Gerald, formed the Sylvia Ritholz Limited Partnership. Defendant became general partner, and Richard and Gerald were limited partners. Each of the sons contributed their respective interest in King Optical Company to the Partnership, for which they each received a 17.857% interest in the Partnership. Defendant retained a 64.286% interest in the Partnership.

Richard Ritholz died in November 1972, and letters of trusteeship were issued under Richard's will to Donald Horwitz and Norman Newman. Under the terms of Richard's will, the Lorelei P. Ritholz Trust was established *fn1 and the Trust succeeded to the interest of Richard in the Partnership.

A final accounting for the Samuel Ritholz estate as entered in the circuit court of Cook County and approved by the probate court in November 1975. Pursuant to this final account, estate taxes and expenses *fn2 were paid by the estate. The total estate assets available after payments of taxes and expenses amounted to $379,926.44.

In 1976, Mr. John Brockhouse, accountant for defendant and for the Partnership, prepared for the windup and dissolution of the Partnership. Brockhouse reviewed the accounting methods used in the final account of Samuel Ritholz' estate because defendant was "dissatisfied with the cash which she had received" from the Samuel Ritholz estate.

In January 1977, the Partnership was dissolved. At dissolution, the cash available to the Partnership for distribution totaled $290,994. According to the ownership percentages, defendant was to receive $187,068 (64.286%), and Gerald Ritholz and the Trust were each to receive $51,963 (17.857%). Distributions in these amounts, however, were never made. Brockhouse, in analyzing the final account of Samuel Ritholz' estate and preparing for the windup of the Partnership, determined that $34,438 of the taxes and expenses paid by Samuel Ritholz' estate should be "reallocated" to the Trust's partnership in the King Optical Company. Pursuant to Brockhouse's proposed reallocation, defendant charged $34,438 against the Trust's interest in the Partnership, and retained $68,876 *fn3 as a payment to herself for taxes and expenses previously paid by the Samuel Ritholz estate. This reallocation reduced the amount available for distribution by the Partnership to the Trust from $51,963 to $17,525.

Brockhouse forwarded his reallocation figures to Donald Horwitz and Norman Newman, trustees of the Lorelei P. Ritholz Trust, and to Mr. Joshua Kaufman, the trustees' attorney, proposing a final partnership distribution of $17,525. The plaintiffs-trustees have demanded a full accounting of the Partnership, claiming that they have received only Brockhouse's "schedules" for the Partnership dissolution. The Trust has accepted no payment from its share of the Partnership funds.

On May 12, 1977, Mr. Kaufman, the trustees' attorney, wrote a letter to Mr. Henry Kenoe, defendant's attorney, stating that the trustees "had no objection to the proposed adjustment," but that "an amendment to the final accounting of the Estate of Samuel Ritholz" would be necessary.

On December 29, 1977, apparently concerned about the personal liability of the trustees, Kaufman again demanded an indemnity agreement be signed by defendant and by Gerald Ritholz.

On April 10, 1978, Lorelei Ritholz, beneficiary of the Lorelei P. Ritholz Trust, wrote to trustee Horwitz, expressing the hope that "court proceedings are not necessary" and advising him of her desire for "a more peaceful and less expensive settlement." Lorelei even herself offered to sign the indemnification agreement.

On May 9, 1978, Horwitz wrote to defendant, advising her that Lorelei had asked him to approve the distribution proposed by Brockhouse, relying solely upon Lorelei's indemnity agreement and not requiring an indemnity agreement from defendant. Horwitz would not agree to this arrangement, fearing "personal exposure for me and my own personal estate." He again expressed his willingness to approve the distributions, but only if defendant executed an indemnification agreement to hold Horwitz "harmless, in the event the distribution proposed by you [Sylvia], with the advice of your lawyer and your accountant, proves wrong and your grandchildren become entitled to a larger distribution from the partnership."

Defendant refused to sign an indemnity agreement, and plaintiffs (trustees) thereupon brought this action for an accounting and distribution of the Partnership assets. Plaintiffs moved for summary judgment and defendant filed a cross-motion for summary judgment. Plaintiffs' motion was denied, and defendant's motion for summary judgment was granted.

Plaintiffs appeal and seek reversal of this order.

I

Plaintiffs contend that the trial court "has erred in applying equitable apportionment and in condoning the instant reallocation of Estate taxes and expenses." Plaintiffs argue that "equitable apportionment is to provide the recipients of probate assets with a contribution from the beneficiaries of non-probate assets for expenses attributable to the non-probate assets"; "the doctrine [equitable apportionment] does not allow for apportionment among probate assets alone"; "the disclaimed asset [10 shares of SJS Optical Ltd.] which is owned by the ...


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