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08/06/87 Ronny H. Potter, As Ex'r v. Kenneth Potter Et Al.

August 6, 1987





513 N.E.2d 423, 160 Ill. App. 3d 444, 112 Ill. Dec. 9 1987.IL.1123

Appeal from the Circuit Court of Lake County; the Hon. Alphonse F. Witt, Judge, presiding.


JUSTICE WOODWARD delivered the opinion of the court. REINHARD and UNVERZAGT, JJ., concur.


Plaintiff, Ronny H. Potter, as executor of the estate of Melvin Potter, appeals from an order by the circuit court of Lake County granting defendants' motion to dismiss this action pursuant to section 2-619(a)(9) of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-619(a)(9)).

O. W. Potter & Sons, Inc., was created in 1948 by the brothers, Melvin Potter and Kenneth Potter, and their father, O. W. Potter. The corporation engaged in the construction business from its Wauconda, Illinois, offices until about 1966. The father and two sons each owned one-third of the outstanding corporate shares. Prior to his death in the early 1970s, the father transferred all of his shares of stock in the corporation, in equal shares to the brothers, with the result that each of them thereafter owned 50% of the corporation. Melvin Potter was president from 1948 until his death on January 16, 1982. Defendant (Kenneth) has been secretary/treasurer from 1964 to the present time. After the father's death, the brothers were the only corporate directors. Defendant served as the corporate bookkeeper from approximately 1965 to the present time. As such, he filled out the vast majority of corporate tax returns, including the 1980 tax form which is central to this litigation.

Since the late 1940s, the corporation has owned a parcel of commercial and industrial real estate at 400 West Liberty Street in Wauconda, Illinois, with buildings located on the rear portion of the premises which have been rented to industrial/commercial tenants. Sometime during the period 1964 through 1966, the corporation obtained a $34,000 mortgage loan and constructed a Dog-N-Suds drive-in restaurant on that part of the premises which fronts on Illinois Route 176. Shortly thereafter, the corporation terminated its construction activities and became solely engaged in the Dog-N-Suds restaurant business and the rental of the buildings on the rear portion of the premises.

From 1966 to Melvin's death in 1982, defendant managed the Dog-N-Suds operation of the corporation, for which he received a regular salary. Defendant's wife, Merry, was employed as a cook and car-hop at a regular salary. Defendant operated the Dog-N-Suds business from 1966 to 1982 as if it were his own.

Until Melvin's death in 1982, the net rentals from the building on the rear portion of the premises were divided equally between the brothers. After the aforesaid mortgage on the Dog-N-Suds construction was paid off in 1976, Melvin received 3% of the adjusted annual gross sales of the Dog-N-Suds restaurant business.

Melvin died on January 16, 1982, leaving two sons, Ronny and Duray Potter, as his only heirs. Shortly after their father's death, Ronny and Duray received a letter from attorney Albert Salvi on behalf of the defendant which claimed that in 1953, the brothers entered into an alleged agreement under the terms of which the survivor had agreed to purchase the decedent's corporation shares based on "the net worth as shown on Federal income tax returns of the corporation for the fiscal year" preceding the decedent's death.

A photocopy of the alleged buy-sell agreement was enclosed in the letter. The purported agreement provided for a tender of an installment judgment note in the amount computed from the corporation's net worth as stated in the preceding year's Federal income tax return.

Attorney Salvi's letter stated, among other things, that under the aforesaid alleged agreement, "Mr. Kenneth Potter must tender and does so by this notice the sum necessary to purchase your father's stock." The letter contained no judgment note or payment of any kind.

On September 1, 1983, this suit was filed in the circuit court below by Ronny Potter as executor of the estate of Melvin Potter, deceased, against defendant and the corporation seeking: (1) an accounting of all receipts, disbursements, and transactions of the corporation and of the defendant covering the period from 1962 to the date thereof, and (2) a judgment in favor of the corporation and against the defendant Kenneth A. Potter in an amount equal to the sums misappropriated by the defendant from the corporation during the period from 1962 to the date of the lawsuit and for other related relief. No answer to the complaint was filed by the defendants.

On October 5, 1983, defendant filed a counterclaim which alleged the existence of a buy-sell agreement between himself and his deceased brother, previous offers to pay the contract price for Melvin's shares of stock upon delivery thereof, the deposit of a judgment note in the principal sum of $38,779.01 with the clerk of ...

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