Estate of Wilhelm, Matter of

• Decision Date: 11 August 1988
• Docket Number: No. 88-181,88-181
• Citation: 233 Mont. 255,760 P.2d 718
• Parties: In the Matter of the ESTATE OF Jeffrey Connor WILHELM, Deceased.
• Court: Montana Supreme Court

Page 718

760 P.2d 718

233 Mont. 255

In the Matter of the ESTATE OF Jeffrey Connor WILHELM, Deceased.

No. 88-181.

Supreme Court of Montana.

Submitted on Briefs July 8, 1988.

Decided Aug. 11, 1988.

Sullivan & Baldassin, John K. Tabaracci, Missoula, for appellant.

Worden, Thane & Haines, Patrick D. Dougherty, Missoula, for respondent.

SHEEHY, Justice.

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 § 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 11 U.S.C. § 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 29, 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 al., 693 F.Supp. 884, 885 (D.Mont.1988). 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. Gomila (1889), 132 U.S. 478, 10 S.Ct. 155, 33 L.Ed. 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. (21 Wall.) 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 (1893), 149 U.S. 608, 13 S.Ct. 906, 37 L.Ed. 867:

A citizen of another state may establish a debt against the estate. (Citation omitted.) But the debt thus established must take its place and share of the estate as administered by the probate court; and it cannot be enforced by process directly against the property of the decedent ... (Emphasis added.)

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.1974), 491 F.2d 177, 181.

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...