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11/09/89 Marian H. (Polk) Fried Et v. Polk Brothers

November 9, 1989





546 N.E.2d 1160, 190 Ill. App. 3d 871, 138 Ill. Dec. 105 1989.IL.1773

Appeal from the Circuit Court of Lake County; the Hon. Bernard E. Drew, Jr., Judge, presiding.


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


The plaintiffs, the widow and three sons of David H. Polk (the heirs), appeal the dismissal of their six-count complaint against the defendants alleging the erroneous valuation in David Polk's estate of the stock owned by him at the time of his death in April 1955. The complaint was dismissed on the grounds it was barred by the statute of limitations and principles of res judicata. (Ill. Rev. Stat. 1987, ch. 110, pars. 2-619(a)(4), (a)(5).) The heirs contend their complaint was improperly dismissed on those grounds and that the trial court abused its discretion in denying them discovery and leave to amend their complaint. We affirm.

David Polk was one of six Polk siblings who owned all the shares in the three closely held defendant corporations, Polk Bros., Inc., Cafco Builders, Inc., and Rand Realty and Development Co., Inc., as of 1955. At the time the complaint was filed, Sol Polk (another of the six Polk siblings), Michael A. Crane and Lester Bachmann were the directors and officers of the defendant corporations and of the Polk Foundation allegedly funded in 1957 with the stock acquired from David Polk's estate. Sol Polk's executors were later substituted as party defendants in his stead below. In addition to David and Sol, the Polk siblings included brothers Harry, Samuel and Morris and their sister, Goldie Luftig.

David Polk's will nominated and appointed his brother, Samuel H. Polk, as executor. It further directed that his executor employ the law firm of Wisch, Crane, and Cotter to probate the estate. When David Polk died, the stock he owned in the defendant corporations was sold pursuant to the terms of his will which, in turn, directed that the stock be sold by his executor according to amended written survivorship agreements he had executed incident to the defendant corporations. Under these amended survivorship agreements, the surviving siblings and/or the defendant corporations had the option of buying the deceased sibling's shares of stock at the book value of the net assets of the respective corporations as of the close of the fiscal year preceding the date of death (in the case of Polk Bros.) or as shown by the semiannual balance sheet (in the case of Cafco) or the last balance sheet (in the case of Rand Realty) plus, in the case of Polk Bros., 1% of the net sales during the current fiscal year up to the date of death. Of 5,000 shares of Polk Bros. common stock, David Polk owned 700; of 9,500 shares of Rand Realty common stock, he owned 1,330; of 500 shares of Cafco preferred stock he owned 70; and of 1,480 shares of Cafco common stock, he owned 207. The value of the stock was to be determined by the auditor or accountants regularly employed by the corporation, and the valuation was to be binding on the parties, their heirs, representatives, administrators and executors. The accountants regularly employed by the defendant corporations were Beckerman, Terrell and Co.

Plaintiff Marian Polk Fried petitioned the probate court for admission of David Polk's estate to probate on May 16, 1955. She swore under oath at the time that she knew the contents of the petition and the statements therein were true. She petitioned that Samuel Polk, David Polk's named executor, be appointed as such, stating that he was "qualified and willing to act as executor."

On October 24, 1955, Samuel Polk, as executor, filed with the probate court a petition for approval of the sale of David Polk's stock in the corporate defendants according to the terms of the amended survivorship agreements. In pertinent part, it was alleged therein:

"THAT BECKERMAN, TERRELL AND CO., certified public accountants, regularly employed by said POLK BROS., CAFCO BUILDERS, INC. AND RAND REALTY AND DEVELOPMENT CO. on October 4, 1955, certified that in accordance with the provisions of the survivorship agreements . . . and the Articles of Incorporation and the By-Laws of RAND REALTY AND DEVELOPMENT CO., that the total value of this stock interest which said DAVID D. POLK, Deceased, had in POLK BROS. CENTRAL APPLIANCE AND FURNITURE CO., and its subsidiaries aggregate the sum of $430,719.94; CAFCO BUILDERS, INC., the sum of $52,127.04; and in RAND REALTY AND DEVELOPMENT CO., the sum of $147,132.57."

Beckerman's certification showed an adjusted net worth of Polk Bros. as of June 30, 1954, of $1,786,967.06. Added to that was $338,471.67, representing 1% of the current fiscal year's net sales of $33,847,167.26 up to April 30, 1955. The sum of those two figures, $2,125,438.73, divided by 5,000 shares, yielded a per share value of $425.08. The final aggregate valuation for Polk Bros. stock of $430,719.94 includes the book value of David Polk's shares of common stock in two subsidiaries of Polk Bros. as well.

The same day the petition was filed, the probate court entered its order finding the matters contained in the executor's petition to be true and approving the sale of David Polk's stock at the valuation specified. The court's order expressly declared the right of Polk Bros. and Cafco to purchase and acquire David Polk's stock interests in said corporations and, further, that Rand Realty also had a right to purchase and acquire the stock interest David Polk had in that corporation. All told, the estate was entitled to receive in excess of $625,000 for David Polk's shares in the corporate defendants.

On July 2, 1956, Marian Polk Fried, as a cotrustee of David Polk's estate, acknowledged the receipt from the executor of all of the assets on hand from the final account of David Polk's estate. The other heirs, then minor children, were represented in the estate by court-appointed guardians ad litem for proof of will and final report. Richard L. Phelan as guardian ad litem approved the executor's final account and report, certifying that he had examined it and had no objection thereto. The estate was closed in 1956. Thirty-one years later, in December 1987, David ...

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