Nawrocki's Estate, In re

• Decision Date: 24 March 1954
• Citation: 268 P.2d 363,200 Or. 660
• Parties: In re NAWROCKI'S ESTATE. NAWROCKI v. KIRKPATRICK.
• Court: Oregon Supreme Court

Page 363

268 P.2d 363

200 Or. 660

In re NAWROCKI'S ESTATE NAWROCKI v. KIRKPATRICK.

Supreme Court of Oregon.

Argued and Submitted Jan. 27, 1954.

Decided March 24, 1954.

George L. Hibbard, Oregon City, argued the cause for appellant. With him on the brief were Beattie & Hibbard, and John C. Caldwell, Oregon City.

Clifford S. Beckett, Oregon City, argued the cause for respondent. With him on the brief were Butler, Jack & Beckett, Oregon City.

Before LATOURETTE, C. J., and WARNER, LUSK, BRAND, TOOZE and PERRY, JJ.

BRAND, Justice.

On February 13, 1945 the testator Casimir F. Nawrocki executed a will by which he devised real property to his wife Mary E. Nawrocki in lieu of dower. On August 23, 1950 he executed a mortgage on the same property, his wife joining therein for his accommodation. The testator died on June 29, 1951. The estate was admitted to probate and an executor was appointed. His widow filed an election to take under the will in lieu of dower and prayed for an order directing the executor to satisfy the mortgage debt from the residue of the estate and thus to exonerate the devised property therefrom. Testimony was introduced in behalf of the petitioner and in support of her petition. The executor, and thereafter the circuit court, denied relief. The petitioner appeals.

The executor, who is respondent, presents a question of law only. The material portions of the will are as follows:

'1. I hereby direct that all my just debts and funeral expenses be paid from the first money available from my estate.

'2. I hereby devise and bequeath to my wife, Mary E. Nawrocki, the premises described in deed recorded in Book 202 at page 140 of the deed records of Clackamas County, Oregon, together with all furniture and furnishings therein. This gift is made to my wife in lieu of dower and claim of dower.

'3. All the rest and residue of my estate, personal and real, I hereby devise and bequeath to my two children, Casimir C. Nawrocki and Wanda N. Lamade, share and share alike; and in event that either of them should die before I do and leave no issue, I devise and bequeath the share that would have gone to that child or his issue, to the survivor thereof.

'4. I hereby nominate and appoint E. W. Kirkpatrick of Milwaukie Oregon as executor of this my last will and testament; and I hereby direct that he be not required to furnish bond in order to qualify as such executor.'

The petition for exoneration shows that the mortgage was in favor of the State Bank of Milwaukie to secure a promissory note in the sum of $6,000. The total appraised value of the property, real and personal, was $47,383.22. The property devised to the plaintiff was appraised at $15,000. We quote:

'That your petitioner executed said note and mortgage along with and at the request of said decedent to enable said decedent to obtain said loan. That your petitioner did not at any time have said funds or any part thereof and that decedent had full use and control thereof and expended the same in his business.'

The legal question presented is whether a specific devise of realty carries with it the right to have the land exonerated from a mortgage executed by the testator to secure his own debt, provided there is sufficient other property not specifically devised out of which such exoneration may be made.

The defendant concedes that the rule of exoneration applied at common law, but argues that the rule has been changed by O.C.L.A. § 18-303, which reads as follows:

'A charge or incumbrance upon any real or personal estate, for the purpose of securing the payment of money or the performance of any covenant or agreement, shall not be deemed a revocation of any will relating to the same estate previously executed; the devises and legacies therein contained shall pass and take effect subject to such charge or incumbrance.' (See ORS 114.150 for change of phraseology.)

In support of her asserted right of exoneration the plaintiff cites the following Oregon decisions: Marshall v. Middleton, 100 Or. 247, 191 P. 886, 196 P. 830, 19 A.L.R. 1421; In te Estate of Hodgkin, 110 Or. 381, 221 P. 1169, 223 P. 738; Ladd & Bush Trust Co. v. Kurtz, 169 Or. 225, 127 P.2d 732. The defendant seeks to distinguish the cases cited on the ground that the statute deals only with encumbrances created after execution of a will. He points out that the encumbrances in all three of the cases cited were created prior to the execution of the will. The point is well-taken, but the cases cited do throw some light upon the issue.

In Marshall v. Middleton, supra, a devisee sought an order directing that land which had been specifically devised to him by the testator be exonerated from a mortgage lien by payment out of the residue of the estate. The devisee relied upon the provision of the will that 'all just debts be paid * * * in the course of administration of my estate.' This court said that:

'* * * in cases of this character the rule that the personalty is the primary fund, out of which the liens upon devised property must be satisfied, is reversed as between the executors and devisees, where devised property is incumbered by a lien not created by the testator, the property itself becomes the primary fund out of which the lien must be satisfied. * * *'

The facts were that the predecessor in title of the testator had executed a purchase money mortgage and the testator bought the property subject to the mortgage before he made his will. A suit had been instituted before the death of the testator to foreclose the purchase money mortgage. It was held that the testator was not indebted at all on the mortgage at the time of his death, and for that reason the rule of exoneration did not apply.

In Re Estate of Hodgkin, supra, the testatrix and her husband borrowed money and executed mortgages as security. It was alleged that the money was used by her husband for living expenses of his family and that the debt was really his debt and not that of the testatrix. Apparently this court so found, for it said that the property was mortgaged 'not for her debt, but for the joint and several obligations of both.' [110 Or. 381, 223 P. 738.] The mortgage was executed before the execution of the will, but that was not the basis of this court's decision. We quote [110 Or. 381, 221 P. 170]:

'It is a well-known rule of law in this state, so thoroughly established as to require no citation of authorities, that, where real property is specifically devised, and such property is subject to a mortgage made by the testator, such mortgage is to be satisfied and discharged out of any property not specifically devised, if such property is sufficient for the purpose, and no different intent appears in the will. So the question here is: Does the clause in the will creating the trust in Miller amount to a specific devise of the Jennings Lodge property described therein?'

The court then held that there was no residuum because the will specifically devised all of the rest of the estate in trust for specified purposes. It was for this reason that the court held against the right of exoneration.

The rule set forth in Re Estate of Hodgkin was reaffirmed in Ladd & Bush Trust Co. v. Kurtz, supra, but was found inapplicable to the facts of that case.

While these decisions are not determinative in the case at bar, they are significant. They recognize that aside from statute, the common-law rule prevails in Oregon. They indicate that if real property is mortgaged for the debt of the testator and thereafter a will is made devising the mortgaged property, the devisee is entitled to have exoneration out of any residuum not specifically devised, if such residuum is sufficient for the purpose, and if no different intent appears in the will. If that be the rule as to devisees of previously mortgaged property, the same rule would undoubtedly apply in the absence of statutes where the will devised property which was free from encumbrance and a mortgage was subsequently executed. A will devising property which was unencumbered when the will was executed would indicate an intent that the devisee should enjoy it unencumbered. We quote:

'The general rule is (in the absence of statute) that land specifically devised which is subject to a mortgage or other incumbrance is to be exonerated out of the personal property of the testator. In order that this rule shall apply, it is necessary to show that the testator was personally liable for the payment of the mortgage debt, though it is not material whether the mortgage was executed before or after the execution of the will. * * *' 1 Underhill on the Law of Wills, § 384, p. 528.

To the same effect see 4 Page on Wills, Lifetime Ed., § 1486, p. 296; and 57 Am.Jur. 993, Wills, § 1474.

At early common law, and even after the adoption of the Statute of Frauds, certain 'changes of estate' occurring after execution of a will operated as a revocation of a previous devise by operation of law. For example, if a testator, having devised realty, entered into a contract to sell it, it was held that the contract operated in equity as a revocation of the devise, because the contract transferred the equitable interest in the property to the petitioner. 1 Page on Wills, Lifetime Ed., § 488, p. 901, and § 494, p. 912. It is clear that this rule of the common law concerning the effect of contracts of sale was changed by our statute, O.C.L.A. § 18-302, ORS 114.140. See In re Pape's Estate (Pape v. United States National Bank), 135 Or. 650, 297 P. 845; In re Wilson's Estate, 85 Or. 604, 620, 167 P. 580; Watson v. McLench, 57 Or. 446, 451, 110 P. 482, 112 P. 416.

Not every transaction dealing with land previously devised had the effect of revoking the will at common law. In the case of mortgages, even though the legal title passed to the mortgagee to secure the performance of the obligation, yet equity looked upon the transaction as creating a lien only. The lien was discharged upon the...