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Settling the Stoltz family feud.

Brothers Sling Mud, Accusations Over $9 Million Inheritance From Father's Estate

THIS IS THE STUFF from which television movies are made.

Call it the Stoltz family feud.

Main characters Mike Stoltz, 37, and brother Steve Stoltz, 40, share the same birthday. They each served as the other's best man.

But when their father, J.P. Stoltz, died in 1977, a fight ensued among the nine Stoltz children over a $2 million life insurance policy and ownership of the Conway-based Polyvend Inc.

Steve was left to own and run the family's vending machine company, which had sales of $25 million in 1982 -- the last year for which sales figures are disclosed.

And there are subplots: fraud and conflict of interest charges, lawsuits and potential lawsuits involving First Pyramid Life Insurance Co. of America and Friday Eldredge & Clark, one of the state's most powerful law firms.

A formal complaint against Chief Justice Jack Holt Jr. of the Arkansas Supreme Court provides further intrigue. There is a conflict-of-interest charge based on his friendship with Herschel Friday, managing partner at the Friday firm in Little Rock.

As the plot thickened, so did the interest on the insurance policy. At one point, it had reached almost $9 million.

Just when it appeared Mike had secured the insurance money for himself and the family estate, his victory was overturned by the state Supreme Court.

Before the Judicial Discipline and Disability Commission made a formal announcement of the findings in the investigation of Holt, chief investigator Don Gilbert died in an automobile accident April 3.

While just a coincidence, it is one more strange event delaying the closing of the estate and the culmination of a 16-year dispute of the last will and testament of J.P. Stoltz.

Mike and Steve wish it were just a TV movie.

Crystal Clear

The Stoltz brothers agree on one thing: The question of the rightful beneficiary to their dad's insurance policy, which is the premise for all the surrounding legal action, is a crystal-clear issue.

But they tell different stories.

"My dad and I talked about this insurance policy, and he outlined what he wanted me to do with it," Steve says. "There was absolutely, unequivocally no doubt."

Not so, says Charles Phillip Boyd Jr. of the Davidson Law Firm in Little Rock. Boyd represents Mike Stoltz.

Boyd says Mike's basic suit against First Pyramid is straightforward compared to the allegations that have followed.

"It was plain the insurance company had paid the wrong party, never told the estate it had a claim and then took a chance that the estate would never find out," Boyd says.

According to Steve, his father said, "I am not dividing up my company between all my kids. I've seen too many companies destroyed that way."

As the eldest son and vice president at the company, Steve became president upon his father's death. The will provided that after 10 years, if Steve had proven he could run the company, it would be his outright.

However, if he sold the company before the 10 years were up, he could take only 50 percent of the sale profits. The rest would be divided among his siblings.

Steve says his father left him the $2 million insurance policy as a liquid safeguard to protect the interest of the estate, of which he was executor, and of the company.

Polyvend actually paid the premium on the policy. But since Steve was the beneficiary, he had to report that premium -- he says for tax purposes -- as income even before his father died.

When the elder Stoltz received the papers for the insurance, says Steve, the estate was incorrectly listed as the beneficiary. Steve says he has documents to prove his father immediately corrected that.

Mike's lawyer disagrees.

Boyd says everything from minutes of Polyvend meetings to financial statements to the actual insurance documents prove this: Even if J.P. Stoltz once thought about naming Steve the beneficiary, the necessary legal steps were never taken.

Boyd says it is such a clear-cut issue that when it came to trial in 1991, he rested his case after just one day of testimony.

A jury concurred. It granted the estate, of which Mike Stoltz was the new special executor, $2 million in compensatory damages, $1 million in punitive damages and penalties and interest totaling $5.69 million.

So much interest had accrued because no one questioned the will or the beneficiary issue until 1987.

"I had no reason in the world to doubt (Steve)," Mike says. He understood the insurance policy was left for estate debt and Steve was handling it. "That was never a worry."

Mike says it was only when he began organizing some of his personal affairs in 1987 that he and his lawyers realized the estate was the rightful beneficiary.

"It seemed very peculiar to me that everything was fine and dandy for 9 1/2 years," Steve Stoltz says. "There's too much coincidence there. I think certain siblings were waiting to see if I could indeed run the company for 10 years."

Now the family is split. Four siblings, mostly the younger ones, have sided with Steve. Three siblings, an aunt and an uncle have sided with Mike.

"The sides were drawn pretty quick," Mike says. "It's been pretty hateful."

All of the Stoltz children were young when their father died in 1977. Steve Stoltz was just 25. A family vote was taken to decide who would raise the two youngest children, who were near the age of 10.

Norma Lee Stoltz, the children's mother, was divorced from J.P. and died four months after he died.

Although all parties had legal representation, there have been questions raised about how well each interest was represented.

The Friday firm represented Steve Stoltz individually and as executor of the estate, even though it appears Steve and the estate may have had adverse interests.

The firm also represented First National Bank (now First Commercial Bank), nominated as trustee of the residuary trust, which would have received the insurance proceeds had the estate been paid.

At the same time, the firm also represented First National Bank in a different capacity. The bank was the estate's largest creditor, being owed $1.62 million.

Herschel Friday was on the board of First National Bank, as was Herbert Thomas, one of the largest shareholders of First Pyramid.

The firm also represented Polyvend.

In 1978, the Friday firm began representing First Pyramid.

William H. "Buddy" Sutton of the Friday firm was elected to the First Pyramid board in 1979.

Boyd says the Friday firm has admitted in court it represented First Pyramid along with every other interested party.

Herschel Friday declined comment for this article, and he refused to allow anyone at the firm to comment.

According to testimony from the 1991 trial, the same day Steve was to be paid the $2 million, memos arrived from First Pyramid's attorneys noting the controversy over the rightful beneficiary. At this time, the Friday firm was not representing the insurance company.

First Pyramid was told that interpleading the money, which would alert everyone with a possible claim, would be the safest course. Interpleading is a procedure used often by insurance carriers, which will deposit the proceeds of a policy in court and let the court decide who gets the money.

The attorneys also noted a "substantial risk" of a lawsuit regardless of who was paid.

First Pyramid chose not to interplead.

Boyd says, "The insurance company said, 'Well, we'll pay the party who's making the claim and hope the rightful beneficiary doesn't find out.'"

"And we almost didn't," Mike says.

Because the jury found fraud in the trial, the estate won even though the statute of limitations had run out on the insurance policy.

But the Supreme Court reversed the decision. It said there was no evidence of fraud on the part of First Pyramid. Therefore, according to the Supreme Court's decision, regardless of who the rightful beneficiary was, the statute of limitations precluded Mike from making his claim.

Lawyers not involved in this case but familiar with its circumstances say Boyd's mistake was going after First Pyramid.

"We made a decision to only pursue the insurance company for tactical reasons," Boyd says.

There is evidence he may be changing his tactics.

"How this all comes down may depend on when and if the Friday firm is ever sued," Boyd says.

A Small State

It is after hours at the Little Rock offices of Shearson Lehman Brothers Inc. where Mike Stoltz is a stockbroker. He is two-thirds of his way through a three-hour interview.

His side of the story is spiked with bitter and sarcastic comments against the "sweet old" Friday firm and the "incest"-ridden Arkansas justice system.

Mike can't wait to tell where he thinks they went wrong.

Suddenly, he stands up, walks to his office door and closes it quietly.

The Friday firm's Buddy Sutton has just entered the Shearson offices to visit his son, Wes, who sits just across a small hallway from Mike.

It is a small state, Mike comments.

Boyd claims the Friday firm knew there was a question of who the rightful beneficiary was because it was First Pyramid's counsel since at least 1979 when the statute of limitations was running on Stoltz's insurance policy.

Then, concrete evidence was shown in 1983 that the firm knew because attorney James Saxton sent a letter to Steve Stoltz to that effect, according to court testimony.

Also, according to court documents, the firm did not tell the estate or First National Bank, the trustee.

If the bank had known, it would have made a claim for the money, according to testimony from Robert Grant, a trust officer with First National.

Arkansas law says that notice to attorneys is imputed to clients, but that is not applicable if conflicts of interest can be shown. In other words, if a lawyer's interests are questionable, a client cannot be held accountable.

The Friday firm did go to bat for the estate when the IRS -- recognizing the estate as the beneficiary -- demanded the estate pay taxes on the insurance policy.

"We were paying the taxes, but we didn't get the money," Mike says.

When the IRS requested copies of the insurance company's files, the Friday firm whited-out portions of the estate files before turning them over to the IRS, according to the court testimony of Lewis Mathis.

Mathis was a lawyer with the Friday firm from 1972-90.

Boyd says, "Who did they think they were dealing with?"

"I never told the estate about the June 7, 1983, letter from James Saxton telling me of the estate's potential claim because James Saxton called and said forget it," Steve Stoltz said in his 1991 testimony. "Everything I did was upon the advice of the Friday law firm."

Going to the Plate

Charlie Boyd was not hired on the estate's behalf until 1989. The firm of Skokos & Rainwater handled the original suit, which was filed in 1988 in Faulkner County against Steve Stoltz. Steve Stoltz was represented by Randy Coleman.

But Coleman and Ted Skokos wanted to open a law firm together, so they both resigned the Stoltz cases.

Mike says he had difficulty finding new legal representation because the Friday firm is a potential defendant for a malpractice lawsuit.

"Now, six years later, I can really see the power of the Friday firm," Mike says. "Because of this good ol' boy network and because of the power of the Friday firm here ... nobody in this town was of mind to step up and go to the plate with them if necessary.

"That's when I knew I was in trouble."

Boyd agreed to take the case in 1989. A year later, he contacted the Friday firm and said he had no choice but to sue the firm.

Then the Friday firm executed an agreement that would extend the statute of limitations on whatever actions were against the firm until the case with First Pyramid was resolved.

Now that the Supreme Court has overturned the case, the Friday firm reportedly maintains it is insulated from any action by the estate, although just two weeks ago the firm again lengthened the tolling agreement.

In addition to appealing to federal courts and the U.S. Supreme Court, Boyd and Stoltz have filed motions requesting, among other things, that the Arkansas Supreme Court recuse itself from the case.

Boyd wants Gov. Jim Guy Tucker to appoint a special judicial committee to rehear the case.

He and Mike believe a question exists regarding Chief Justice Holt's relationship with Herschel Friday. They say Holt should have at least addressed that before the court last December when the case was heard.

Also filed is a petition asking for a special master to look into the question of a conflict of interest.

In the petition's concluding remarks, Boyd says, "Chief Justice Holt is said to not only have hunted intermittently through the years at Mr. Friday's farm in Mayflower, and potentially on leases both have in the state of Texas, but that he hunted during the latter part of 1992 while this case was either pending or awaiting oral argument before this honorable court, and that they 'ran into each other' in the state of Texas since the opinion came down."

Holt says he has on occasion hunted with Friday as part of a group, but he has never traveled with him to hunt in Texas. Further, he says in the weeks before the Dec. 22 court date he did not hunt with Friday, although he did hunt with him one morning following the decision in the case.

Against Boyd's advice, Mike filed a complaint with the Judicial Discipline and Disability Commission, but Holt is holding it against Boyd.

"I had my own bird dogs," Holt declares. "The whole thing is just senseless ... I will not participate in any further litigation involving Mr. Boyd or the Davidson Law Firm."

And he is not referring to the Stoltz case alone.

"They have manufactured these claims in an effort to overturn the lawsuit and collect their attorneys' fees," Holt says. "I deeply resent that."

Boyd says, "I've had jury verdicts reversed by the Supreme Court based on a complicated legal issue. In those lawsuits I've not cried sour grapes."

But this case is different.

"You leave a part of yourself in the courtroom in a trial like this," Boyd says. "It's not just Mike's battle anymore."

Holt says he does not see how the Friday firm is even an interested party. He adds, "Common sense might dictate that if I was trying to favor the Friday firm in any way, I would vote to affirm the judgment."

Boyd and Mike Stoltz hope to avoid litigation with the Friday firm, but they say they will sue if they have to.

The Faulkner County suit against Steve for mismanagement of the estate is still pending.

And the family is still divided with no hope of a forthcoming reconciliation.

"This thing's got to get settled, that's all there is to it," Steve says. "It's torn the family apart. It's a tragedy."

Steve is tired of playing the bad guy.

"They can try this thing in War Memorial Stadium for all I care," Steve says. "I'm not ashamed of anything I've done."

Of his father, Steve says, "The way he structured his will may or may not be palatable. (But) what he wanted done was crystal clear."

What is supposed to be clearly evident continually sinks deeper into a legal quagmire.

By the time the estate is officially closed, the Stoltz family will need more than a two-hour movie of the week to tell the story of its feud.

It should qualify for its own series.
COPYRIGHT 1993 Journal Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:over inheritance and ownership of Polyvend Inc.
Author:Rengers, Carrie
Publication:Arkansas Business
Date:Apr 12, 1993
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