Larson v. Mennes

Stevens, J. The estate of the deceased was insufficient to pay her debts and the amounts due for materials supplied and money advanced by the bank for the purpose of constructing a house on lot 7. The parties stipulated that lot 7 was worth $300 at the time of the death of Anne Mennes, before the house was built thereon. The parties agree that all property left by the deceased, including lot 7 at the agreed valuation of $300, must be devoted to the payment of the debts of the deceased, and that no part of the value of the property owned by Mrs. Mennes at the [554] time of her death can be devoted to the payment of any obligations incurred by Ole Mennes after her death for the purpose of constructing the house on lot 7. No question was raised upon this appeal as to the rights of the first mortgagee. The only controversy is between the mechanic’s lien claimant and the second mortgagee on the one hand and unsecured creditors and legatees on the other hand over the. disposition of funds remaining after the amount due upon the first mortgage has been paid. This controversy involves the disposition of the fund of $2,900 derived from the sale of lot 7 and the house thereon by deducting from the total selling price the expenses of the sale and $300, the agreed value of the lot. The creditors of the estate claim this fund on the theory that the house was built by Ole Mennes in his capacity as executor. This position is untenable because the court found that the house was built and the obligations incurred by the residuary legatee personally and not as executor. No part of the assets of the estate was used in the construction of the house. Those who sold materials and advanced money to build the house have no claim against the estate or the $300 deposited in court to represent the value of lot 7. The $300 belong exclusively to the creditors of the deceased. Immediately upon the death of Anne Mennes the title to her estate vested in her husband as residuary legatee. The rights of the creditors of the deceased likewise vested at the time of her death. Scott v. West, 63 Wis. 529, 552, 24 N. W. 161, 25 N. W. 18; Union Nat. Bank v. Hicks, 67 Wis. 189, 191, 192, 30 N. W. 234. This title so vested in the residuary legatee was subsequently divested when in the course of the administration it was ascertained that the real estate of the deceased must be sold to pay debts and specific legacies. The fact that these debts entirely exhausted the estate of the decedent did not create an intervening estate. This fact simply resulted in divesting the estate [555] which had vested in the residuary legatee at the time of death. The situation here presented is entirely different from that which arises when the value of an estate is increased during administration by the use of funds belonging to the estate or through such cause as an advance in the value of the property. Here the enhancement in value was caused solely by the erection of the house, which was made possible by the money and the materials procured by the residuary legatee personally for which no claim is made against the property of the deceased and for which the estate cannot be made liable in any way. Under such circumstances, as between unsecured creditors and legatees and those whose money and materials have enhanced the value of lot 7, it is inequitable to give to the unsecured creditors of the estate the value added to lot 7 through the. materials supplied and money advanced to construct the house thereon. To do equity the court must devote the full value of the estate of the deceased at the time of death to the payment of claims against her estate. The value added to the property of the deceased after death must be devoted to the payment of the claims of those who supplied the materials and the money that added this value. This enhanced value is not and never was the property of the deceased and never became a part of the estate of the deceased. The mechanic’s lien and the lien of the mortgage given by Ole Mennes attached only to the estate or interest of the residuary legatee. When the estate of the residuary legatee was divested in the course of the administration of the estate, the mortgagee and the lien claimant were likewise divested of all claims to the interest of the residuary legatee in lot 7. But when a residuary legatee is divested of his estate, after he has added value to the property, equity recognizes his right, as against unsecured creditors, to an accounting for.the value which he added to the lands of [556] the estate, and his creditors who supplied the materials and the money which made possible this enhanced value are subrogated to his rights to such an accounting, so far as the proceeds of such accounting are required to satisfy their claims. In working out the equities of the parties, the priorities which existed when these liens attached to the estate of the residuary legatee should be recognized in order that the rights of the parties may be preserved as they would have existed if the estate of the residuary legatee had not been divested. Counsel for the respondent bank contend that the mechanic’s lien of the Caldwell & Gates Company is not valid because the requirements of the statutes were not complied with in the preparation and filing of the claim for lien. That question is not presented by the record because there is no bill of exceptions. The fact that the findings recite that the claim for lien is a part of the record does not change the rule that this court is bound to accept the facts as found by the trial court unless the proof on which a review of these findings is asked is incorporated in a bill of exceptions. Under the judgment entered by the county court the proceeds of the sale of the house built by the residuary legatee upon lot 7 were subjected to the payment of debts and legacies before they were devoted to the payment of the claims for materials used and money advanced to build the house. This was error. The debts of the deceased and the specific legacies would have entirely exhausted the fund derived from the sale of the house on lot 7, thereby depriving the lien claimant and the mortgagee of their right to share in the enhanced value which they added to lot 7. The judgment must therefore be reversed and a new judgment entered which will provide that the proceeds of the sale of lot 6 and $300, the value of lot 7, be devoted to the payment of the principal, interest, and costs on the foreclosure of the mortgage given bv Anne Mennes, that this fund be then [557] used to pay the expenses of administration, funeral expenses, and debts allowed against the estate and legacies in the order fixed by the judgment. No costs will be taxed for or against the creditors or the legatees or the estate. The judgment will provide that the $2,900 enhanced value be devoted first to the payment of the sum due the Caldwell & Gates Company with interest, and second, to the payment of the mortgage of the First National Bank given by Ole Mennes, together with interest. The costs of the bank on its claim under the mortgage given by Ole Mennes and the costs of the Caldwell & Gates Company will be taxed against Ole Mennes personalty, but not paid out of the fund in court, unless there is a surplus after paying the full amount of principal and interest due the Caldwell & Gates Company and the bank. No costs will be taxed in this court. The intervening creditors will pay the fees of the clerk of this court. By the Court. — The judgment is reversed, and the cause is remanded with directions to enter judgment in accordance with this opinion. Rosenberry, J., dissents.