Estate of Wilhelm

No. 88-181
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
IN THE MATTER OF THE ESTATE OF
JEFFREY CONNOR WILHELM,
Deceased.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Jack L. Green, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Sullivan & Baldassin; John K. Tabaracci, Missoula,
Montana
For Respondent :
Worden, Thane & Haines; Patrick D. Dougherty, Missoula,
Montana
Submitted on Briefs: July 8, 1988
Decided: August 11, 1988
Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
In this case, we are confronted with an aspect of the
continuing interaction of federal and state laws, procedure,
and authority in our complex federal system. Following entry
of a default judgment against Jeffrey Wilhelm in the United
States District Court for the Southern District of New York,
Credit Alliance Corporation registered the same and began
execution proceedings. Those efforts to execute on the
judgment have resulted in actions before the United States
District Court for the Montana District, the United States
Bankruptcy Court, the Alaska Superior Court, and the District
Court of the Fourth Judicial District, Missoula County.
Credit Alliance Corporation appeals from the judgment of
the District Court of the Fourth Judicial District, Missoula
County, which determined that certain real property located
within Missoula County was subject to the family protection
allowances of 5 72-2-801 et seq., MCA, and thus exempt from
execution pursuant to Credit Alliance Corporation's judgment
lien. We affirm.
The issues before the Court are:
1. Did the District Court lack jurisdiction to hold
that the real property was subject to Montana's Homestead,
Exempt Property and Family Allowances, thus invalidating
Credit Alliance Corporation's execution?
2. Did the District Court err in holding that the
Homestead, Exempt Property, and Family Allowances were
superior to a judgment lien on the decedent's real property?
On April 23, 1982, Credit Alliance Corporation obtained
a default judgment against Jeffrey Wilhelm, a resident of
Alaska, from the United States District Court for the
Southern District of New York in the amount of $43,115.74
plus interest based on the underlying claim of Wilhelm's
failure to repay a promissory note. The judgment was
registered in the United States District Court for the
District of Montana the same day and subsequently docketed
upon the records of the Missoula County Clerk of Court on
October 26, 1982.
On May 8, 1986, Credit Alliance Corporation caused a
Writ of Execution to be issued by the United States District
Court of Montana and delivered to the United States Marshal.
The United States Marshal scheduled for sale on July 8, 1986,
certain real and personal property of Jeffrey C. Wilhelm,
consisting of a 1.9 acre parcel of land in Missoula County
and a 1969 Buddy Mobile Home. Jeffrey C. Wilhelm filed for
bankruptcy in Alaska, his state of residence, on July 3, 1986
and the automatic stay pursuant to I1 U.S.C S 362 prevents
the United States Marshal's sale from proceeding.
Thereafter, on July 11, 1986, the Writ of Execution was
returned by the Marshal unsatisfied.
On October 21, 1986, Jeffrey Wilhelm died in an
automobile accident near Palmer, Alaska. At that time, he
was seeking to have the default judgment overturned.
Shortly after Wilhelm's death, probate proceedings were
initiated in the Third Judicial District of the State of
Alaska, Wilhelm's domicile. On January 13, 1987, Credit
Alliance Corporation filed a creditor's claim against the
estate in the amount of the judgment plus interest, costs,
and attorney's fees.
The bankruptcy proceedings were subsequently dismissed
on February 6, 1987, dissolving the temporary stay. On June
20, 1987, Credit Alliance Corporation caused a new Writ of
Execution to be issued and delivered to the United States
Marshal. On July 28, 1987, the U.S. Marshal levied upon real
and personal property of the estate of Jeffrey C. Wilhelm
located in Missoula County, Montana. Pursuant to that levy,
a 1969 Buddy Mobile Home and Jeffrey Wilhelm's purchaser's
interest in a Contract for Deed for 20.18 acres of land in
Missoula County were sold at U.S. Marshal's sale on September
9, 1987. A subsequent U.S. Marshal's sale was held on
November 18, 1987 for 1.9 acres of land in Missoula County.
The properties at both sales were purchased by the Credit
Alliance Corporation which was put on notice at the time of
the sales of the surviving spouse's claim for exempt probate
allowances against those properties.
In the meantime, the Alaska probate proceedings were
continuing and ancillary proceedings were initiated in
Missoula County, on August 27, 1987. On September 17, 1987,
the Alaska Superior Court determined that Wilhelm's estate
was inadequate to satisfy the Alaska family protection
allowances and ordered that the real and personal property of
the Montana estate be used to satisfy the same. The property
in the Montana estate is valued at $29,000 and does not
exceed the exempt probate allowances as ordered by the Alaska
Court.
A hearing was subsequently held before the state
District Court of the Fourth Judicial District for the County
of Missoula, for the purpose of determining whether the
family protection allowances were superior to Credit Alliance
Corporation's judgment lien. On January 2 9 , 1988 the state
District Court issued an order declaring that the family
protection allowances were allowed, were exempt from and had
priority over the creditor's claim of Credit Alliance
Corporation, and were superior to Credit Alliance
Corporation's judgment lien. The order also declared the
prior execution sales of Credit Alliance Corporation void.
During the course of these proceedings, Credit Alliance
Corporation had also filed a quiet title action concerning
the property sold pursuant to the execution sale. The estate
of Wilhelm answered by motion to dismiss. On July 20, 1988,
the United States District Court for the District of Montana
granted Wilhelm's motion to dismiss based on the state's
exclusive jurisdiction over probate matters.
JURISDICTION
Credit Alliance Corporation, in effect, argues that the
District Court lacked jurisdiction in two instances. See
Credit Alliance Corporation v. Wilhelm, et a1 (D. Mont.
1988), No. 87-218, slip op. at 3. First, Credit Alliance
Corporation contends that the District Court lacked
jurisdiction to determine the rights of the parties to the
property at issue because such property was in the custody of
the U.S. District Court and thus subject to the exclusive
jurisdiction of the federal court. Secondly, it is argued
that the District Court lacked the authority to invalidate
the federal execution sale. Upon examination, we find any
error to be moot.
Courts are the creatures of law and as such have no
authority outside that granted by law. Jurisdiction is the
power, granted by law, of a court to entertain, hear, and
determine a particular case or matter. State ex rel. Bennett
v. Bonner (1950), 123 Mont. 414, 425, 214 P.2d 747. It is a
prerequisite to judicial intervention or decision; in its
absence, the actions of a court are without effect. Wilson
v. Thelen (1940), 110 Mont. 305, 100 P.2d 923.
Art. VII of the 1972 Montana Constitution is the
wellhead from which judicial authority flows. Pursuant to
Art. VII, 4, district courts are vested with original
jurisdiction over "all civil matters and cases at law and in
equity .. . and such additional jurisdiction as may be
delegated by the laws of the United States or the state of
Montana. " Clearly, the broad sweep of this provision
encompasses matters of probate.
Section 72-3-111, MCA, provides that "the district court
has exclusive jurisdiction of all probate matters." In
addition, the district courts of this state are vested with
"the full power to make orders, judgments, and decrees and
take all other action necessary and proper" to effectuate the
court's authority. Section 72-1-202(2), MCA. The conclusion
is thus inescapable that the state District Court properly
had jurisdiction over the assets of the estate. The issue
therefore becomes one of federal preemption.
By virtue of the Supremacy Clause, state jurisdiction is
subject to federal preemption. Rio Grande Railroad Co. v.
Gomilu (1889), 132 U.S. 478, 10 S. Ct. 155, 33 L . E ~ 400.
However, the United States Supreme Court has long recognized
the primacy of state courts over probate matters. See Yonley
v. Lavender (1874), 88 U.S. 276, 22 L.Ed 536. Although the
federal court retains jurisdiction over claims impacting the
estate, the court cannot seize and control property which is
in the possession of the state probate court. Waterman v.
Canal-Louisiana Bank & Trust Company (1909), 215 U.S. 33, 44,
30 S. Ct. 10, 12, 54 L.Ed 80, 84. The assets of the estate
remain subject to exclusive state control. As the Waterman
court noted, citing Byers v. McAuley (18931, 149 U.S. 608, 13
S. Ct. 906, 37 L. Ed. 2d 867:
A citizen of another state may establish a debt
asainst the estate. (Citation omitted.) But the
debt thus established must take its place and share
-
of the estate as administered by the probate court;
- - cannot - enforced b~ process directly
and it be
against the roperty -of - decedent. .
the .
(Emphasis a e d . 7
215 U.S. at 44, 30 S.Ct at 12, 54 L.Ed at 84.
It is thus clear that while "a federal court may
exercise jurisdiction and enter a judgment binding on a
claimant and the administrator of an estate, the federal
court may not exercise dominion over assets in the estate
which by state law are subject to the exclusive possession of
the state probate court." Nichols v. Marshall (10th Cir.
Similarly, the federal courts have also demonstrated a.
reluctance to intrude upon the state province of family
protection. In United States v. Yazell (1966), 382 U.S. 341,
86 S. Ct. 500, 15 L. Ed. 2d 404, the Supreme Court was asked to
uphold the Small Business Administration's attempt to levy on
property pursuant to loan default in violation of Texas
family law. Noting the absence of a federal interest
sufficient to override state law concerning family and
family-property arrangements, the court held:
We decide only that this Court, in the absence of
specific congressional action, should not decree in
this situation that implementation of federal
interests requires overriding the particular state
rule involved here. Both theory and the precedents
of this Court teach us solicitude for state
interests, particularly in the field of family and
family-property arrangements. They should be
overridden by the federal courts only where clear
and substantial interests of the National
Government, which cannot be served consistently
with respect for such state interests, will suffer
major damage if the state law is applied.
Each State has its complex of family and
family-property arrangements. There is presented
in this case no reason for breaching them.
382 U.S. at 352, 86 S.Ct. at 507, 15 L.Ed.2d at 410. See
also Fink v. OINeil (18821, 106 U.S. 272, 1 S. Ct. 325, 27
L.Ed 196 (federal court cannot order execution on land
protected by state homestead exemption.)
In the instant case, the issuance of the writ of
execution by the court clerk following Jeffrey Wilhelm' s
death infringed upon the state's jurisdiction to determine
matters of probate. Upon Jeffrey Wilhelm's death,
jurisdiction over the assets of the estate was vested solely
in the state court. See Waterman, supra. Credit Alliance
Corporation's subsequent attempt to execute on the assets of
the estate pursuant to a federal writ of execution violated
the state's prerogative and the prohibition against execution
during the pendency of probate in contravention of S
72-3-813, MCA. It also contravened the state's primacy in
the area of family protection. See discussion, infra.
When confronted with an analogous situation, the United
States Court of Appeals for the First Circuit determined that
a writ issued solely on the authority of a federal court
clerk in violation of state law is without effect. Gabovitch
v. Lundy (1st Cir. 1978), 584 F.2d 559, 561. However,
neither this Court nor the District Court has the authority
to invalidate federal action. Rio Grande Railroad Co. v.
Gomily (1889), 132 U.S. 478, 10 S. Ct. 155, 33 L.Ed 400. That
task remains solely within the discretion of the federal
courts. In this case, we conclude the federal court has so
acted.
In Credit Alliance Corporation's related quiet title
action before the federal District Court, Credit Alliance
Corporation claimed the right to quiet title to the property
pursuant to the property's purchase at the execution sale.
The federal court disagreed. Recognizing the exclusive
jurisdiction of state courts in probate matters, the federal
court determined that jurisdiction over the property was
vested in the state court upon Jeffrey Wilhelm's death, an
event which occurred prior to the execution. Credit Alliance
Corporation v. Wilhelm, et al. (D. Mont. 1988), (No. 87-218)
slip op. at 3. Consequently, the federal court lacked
jurisdiction to determine title to the property. Slip op. at
4.
On its face, the federal court's determination that the
assets of the estate of Jeffrey Wilhelm became subject to
state court jurisdiction upon his death, a time prior to the
execution, clearly invalidates the writ. Although the
District Court lacked jurisdiction to invalidate the federal
writ of execution, it nevertheless had the authority to
determine title to the property. We must therefore conclude
that the issue is moot.
PRIORITY OF CLAIMS
Judgment liens are controlled by Title 25 of the Montana
Code Annotated. Section 71-3-1504, MCA. Pursuant to S
25-9-301 (2), MCA, a judgment constitutes a lien against "all.
real property of the judgment debtor not exempt from
execution ... " (Emphasis added) . In the instant case,
Credit Alliance Corporation contends that the property at
issue is not exempt from execution. We disagree.
Judgment liens are designed to assist creditors to
collect debts due and owing. Generally, the death of a
judgment creditor does not affect the vitality of a judgment
lien. Section 25-13-103(2), MCA. However, a judgment lien
is solely a creature of statute and completely dependent upon
the authorizing statute for the terms and limits of its
existence. McMillan v. Davenport (1911), 44 Mont. 23, 31,
118 P. 756, 758, 759. It is a general lien on all real
property owned by the debtor but is not a specific lien on
any particular piece of property. Vaughn v. Schmalsle
(1890), 10 Mont. 186, 194, 25 P. 102, 103. As such, a lien
does not create title to the property nor does it create an
estate or interest therein. See, Martin v. Dennett (Utah
1981), 626 P.2d 473, 475. Rather, the lien merely creates a
right of seizure of the debtor's interest as defined and
limited by the terms of the authorizing statute. See, Hannah
v. Martinson (Mont., No. 88-60, Decided July 7, 19881, 45
St.Rep. 1203.
The family protection and allowances granted pursuant to
statute states public policy. The goal is to ensure t.hat the
family of a decedent is not left destitute and dependent upon
the public charity. Estate of Lawson (Mont. 1986), 721 P.2d
760, 762, 43 St.Rep. 1261, 1263. Unlike judgment liens, the
family protection allowances grant the family of the decedent
a vested interest in property. The right exists apart from,
and in addition to, any rights flowing from the estate.
Lawson, 721 P.2d at 762, 43 St.Rep. at 1263; Matter of
Merkel's Estate (Mont. 1980), 618 P.2d 872, 37 St.Rep. 1782.
In addition, the right is to be liberally construed in order
to effectuate its purpose. Matter of Hutchinson's Estate
(Alaska 1978), 577 P.2d 1074, 1076. See also, Lawson, supra
(nature of family allowances preclude defenses of offset,
satisfaction, payment or abandonment).
In the instant case, we are confronted with a statutory
conflict between the competing interests of the decedent's
family and creditors due to the insolvency of the estate. In
such situations, the applicable statutes cannot be viewed in
a vacuum. Rather, the statutes should be read together and,
if possible, harmonized so as to give effect to each of them.
Shuman v. Bestrom (Mont. 1985), 693 P.2d 536, 42 St.Rep. 54.
Where there are ancillary proceedings in this state, the
family of the decedent is entitled to family exemptions and
allowances as determined by the law of the decedent's
domicile--Alaska. See S 72-3-821, MCA. Pursuant to Alaska
law, Wilhelm's family is entitled to a homestead allowance,
exempt property allowance and family allowance totaling
$52,000. See, AS S S 13.11.125, 130 and 135. However, the
insolvency of the Alaska estate has left $48,253.74 of the
amount unsatisfied.
Both Alaska and Montana law provide that the homestead
allowance is exempt from and has priority over all claims
against the estate. See AS 13.11.125, AS and §
72-2-801(2), MCA. A similar priority has been granted under
the family allowance and exempt property provisions in order
to provide the dependents of the decedent with the means to
provide themselves with the basic necessities of life. See
AS 5 13.11.130, 13.11.135, AS and SS; 72-2-802(2),
72-2-803 (2), MCA. In addition, both probate codes recognize
the continuing nature of a judgment lien. See AS S
13.16.515, and § 72-3-812, MCA.
However, unlike Alaska, this Court has not been
confronted with a similar dispute. In Hutchinson, supra, the
Alaska court was asked to determine the priorities between
the family protection allowances and administrative expenses.
Although applying an Alaska statute, the court's examination
of the rationale underlying the priority given family
protection allowances is nonetheless sound.
Those who dealt with the decedent did so with
knowledge of the existence of such provisions for
the protection of himself and his family, and only
upon the margin of his credit over such exemptions.
It is therefore in no sense unfair to them that
such provisions be continued in effect after his
death, for the benefit of his family. The public
welfare, moreover, is largely involved. If
indigent widows and orphans were to be left wholly
without means of support, a great burden would be
cast upon society and they would frequently be left
to suffer for faults which they were without power
or capacity to oppose. It is repeatedly and
soundly declared, accordingly, that the statutory
rights of the family of a decedent to maintenance
and support and to such protection against
deprivation of the bare necessities of life as is
accorded by the exemption and homestead laws and
continued for their benefit, although in derogation
of the common law, are strongly favored and are to
be liberally construed in view of their
humanitarian purpose.
577 P.2d at 1076. We believe the same reasoning to be
equally applicable here.
While the code indicates that a judgment lien survives
the death of a debtor ( 5 s 25-13-103 (2), 72-3-812, MCA) , it
does not provide that the judgment creditor's interest is
inviolate. The creditor was aware of the family protection
laws at the time he engaged in business with the debtor and
knew that his remedy for breach might be subject to the same.
Unlike a mortgage, a judgment lien does not create a vested
right in a specific piece of property. Short of such a
right, the existence of the lien should not prevent the
property to which the lien attached from being marshalled as
assets of the estate. See, Martin, 626 P.2d at 476; see also
In Re Donner's Estate (Fla. App. 1978), 364 So. 2d 753 (lien
cannot be imposed upon the surviving spouse's dower); Thomas
v. Bailey (Miss. 1979), 375 So. 2d 1049 (widow's allowance is
superior to judgment lien).
We therefore conclude that although the judgment lien
attached prior to Wilhelm's death, the lien was extinguished
upon the exercise of the Wilhelm family's statutory rights
granted pursuant to the family protection allowances. At
that time, the property was no longer non-exempt within the
meaning of 5 25-9-301(2), MCA.
It is not necessary now to discuss the issue advanced by
the estate that when Credit Alliance Corporation filed a
creditor's claim in the Alaska probate proceedings, it waived
its judgment lien upon specific probate property.
The judgment is affirmed.
d e.hw-
Justice
/