### 80-04 IN THE SUPREME COURT OF THE STATEOF MONTANA 1980



### IN RE THEMARRIAGE OF LINDA KRUM, Petitioner and Respondent,

GERALD JACOB KRUM, Respondent and Appellant.

Appeal from: District Court of the ThirteenthJudicial District, In and for the County ofYellowstone. Honorable Charles Luedke, Judgepresiding. Counsel of Record: ForAppellant: R. P. Ryan, Billings,Montana ForRespondent: George T. Radovich,Billings,Montana

Submitted on briefs: April 25, 

### 1980 ~ecided:

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# 2619@ Filed: 

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## jqB[)Mr. ChiefJustice Frank I.Haswell delivered the Opinion of the Court.

Gerald Krum appeals from the property settlement provisions of a divorce decree entered intheYellowstone County District Court. Gerald and Linda Krumwere married in1964. They were separated briefly in1976 and were permanently separated in December, 1977. Linda filedfor divorce on August 30, 1978, the trial was held on August 16, 1979, and the District Court entered itsfindings of fact, conclusions of law, and decree of dissolution on October 25, 1979. Until December, 1977, both husband and wife took an active part inthe family farming operation located near Huntley, Montana. Following the separation, Linda 

### lived inthe family's trailer home with the parties' two children. She no longer took

an active part inthe farming operation, although she did not interferewithGerald's use of the land and equipment which was held intheirjoint name. Following the separation, Jerry continued to operate the farm and received all the profit and loss from the operations. He paid Linda $500 per month inchild support inaddition to allowing her the use of the family home. Linda began working parttime as a legal secretary-receptionist and attending Eastern Montana College. The principal assets of the marital estatewere 120 acres of irrigatedfarm land, acquired from Gerald's parents in1975 through a contract for deed, and farm machinery, acquired partly from Gerald's parents and partlyduring the marriage and after separation. The principal liabilitieswere the amount owing on the contract for deed and afluctuating farm operating loan. The District Court made the following valuation of the marital estate as of the trial date:Farm Land MARITAL ESTATE $165,000.00 Balance owing 

# - 73,000.00 

### $ 92,000.00 Farm Equipment: From respondent's father 

### $ 13,560.00 During marriage 44,880.00 Since separation 12,800.00 Mobile Home (inplace) Savings Account Keogh Plan (discounted) 1978 Pontiac (actual equity) Horse Furniture

TOTAL $185,840.00

The District Court also found that husband and wife had contributed equally tothe accumulation of the marital estate prior to the separation and that although Linda did not function

as amarital partner following the separation, her unfulfilled obligation was offset by Gerald's use of her interest inthe land and machinery. As a result, the District Court entered a divorce decree which required Gerald to provide support of $250 per month per child and made the following equal property division:



### TO PETITIONER LINDA ANN KRUM: 

### - MobileHome and 5 acres of farmstead 

### $ 27,000.00 Savings Account 2,000.00 1978 Pontiac (net) 1,500.00 Horse 100.00 Furniture 500.00 Cash Payment 

### - 61,820.00 

### $ 92,920.00 

### GRAND TOTALTO RESPONDENT GERALD JACOB KRUM: - Farm Land (net) Farm Equipment and pickuptruck 71,240.00 Keogh Plan 6,500.00 TOTAL $154,740.00 LESS cash payment to petitioner 

# - 61,820.00 FINAL TOTAL - 

### $ 92,920.00

Itwill be noted that this division does not make provision for the farm operating loan. The amount of this loanfluctuates considerably. The lowest it has been inthe last seven or eightyears isapproximately $7,000 and the highest was $49,500

on the date of trial. The note balance on the date of separation

was $28,000 and the balance on April 

### 1, 1979, was $22,000. The proceeds have been used for farm expenses and personal items. The testimony at trial does not reveal the exact disposition of the proceeds and no attempt was made to quantify the amounts. Gerald testifiedthat the balance on the note isdirectly related tothe income that will come out of the farm for 1979. He estimated that approximately $35,000 isattributable to 1979 farm expenses. Also a pickup truck and combine were purchased through the borrowings. Gerald also testified that portions of the note were used to pay child support, to buy personal items, and to repair his current leased residence. The lastexpense will be reimbursed inthe future. Gerald Krum moved to amend the findings, conclusions and decree to include the operating loan inthe net marital estate and to value the estate as of the date of separation inDecember, 1977, instead of the date of trial. The DistrictCourt entered

an order denying the husband's motion. Inan attached memorandum the court stated: "The primary adjustment being urged by respondent in hismotion to amend Findings and Conclusions, and the principal cognizable one, isto incorporate into marital estate calculations the amount of the farm operating loanwhich, at the time of trial, was $49,500.00. This loan account exists upon a continuing basis, is renewed annually, and fluctuates widely. Itwas intentionallyomitted inthe Court's calculations because of a lack of sufficient information todo otherwise. For example: The evidence showed that respondent purchased a combine, a pickuptruck, a camper she11, CB radio and stereo in 1978, afterthe parties separated, for a total cost of $12,800.00. The money for these purchases came from the operating loan and, as a consequence, no speci

### ficencumbrance became imposed upon the equipment itself and, although the evidence advises that some $22,000.00 in payments were made upon the loan in1978, there isno itemization given to show the relationship ofsuch payments to the indebtedness incurred in purchasing this equipment; so itsnet equity is impossible of determination under the evidence presented. Consequently, the Court was left with the alternative of either using the purchase price as the value to the marital estate as though it was paid infull, or considering it encumbered to itsfull value and, therefore, having no equity whatever. Obviously, it is not valueless, so the first alternative had to apply. "Further, inconnection with using the whole

amount of the loan balance as a deduction from marital assets, as isurged by the respondent, itappears that the proceeds from the operating loan are used largelyfor noncapital expenses, being$35,000.00 in1979 todate of trial. These expenses have no relationship to a determination of marital assets when the farm proceeds are excluded as has been the case here. Even 

### if included, however, inthe circumstances ofthese parties therewould be a problem of detailed accounting to determine which expenditures are relevant to the marriage and the marital assets of these parties and which are not. Also, it would very likelyrequire a reconci1iationof the operating loan account over several years inthe past, as well as into the future, by reason of the mechanics of its continuing operation. "The respondent has had, and under the decree

continues to have, the farm operation exclusively to himself, with both expenses and income his, as well as any profit or loss. That was the basis upon which the evidence tendered the issues tothe Court for itsdecision and itwas on that basis that the matter had to be decided." With regard tothe future proceeds, Gerald Krum testified that he could not estimatethe value of his sugar beets, corn, grain and hay crops which were growing on the jointly owned land and 260 additional acres that he leased. The District Court also found no authority to support Gerald Krum's contention that the marital estate should be valued

as of the date of separation rather than the date of trial. The following issues are raised on appeal: (1) Whether the DistrictCourt committed reversible error by refusing to deduct the value of a farm operating loanfromthe value of the marital estate; and (2) Should the net marital estate be determined on the date of separation or on the date of dissolution? The disposition of a marital estate isgoverned by section 40-4-202, MCA, and is largelywithinthe discretion of the DistrictCourt. This Court will not disturbthe decision of the trial court absent a clear abuse of discretion. Eschenburg v. Eschenburg (1976), 171Mont. 247, 557 P.2d 1014. The test for abuse of discretion iswhether the trial court acted arbitrarily without the employment of conscious judgment or exceeded the bounds of reason. InreMarriage of Berthiaume (1977), 173 Mont. 421, 567 P.2d 1388; Fredericksen v. Fredericksen (1980), Mont. 

## ,605 P.2d 1135, 37 St.Rep. 191. 

### Ofthe $49,500 balance of the farm operating loan, Gerald Krumtestifiedthat he estimated that$35,000 represented 1979 noncapital farm expenses and $1,400 represented residence repairs. The $1,400 

### will be reimbursed by the owner of the residence at a later date and the$35,000 will be reimbursed by farm profit or absorbed infarm loss from the 1979 crops and the sale of cattle. Neither of these future proceeds were included inthe marital estate; thus the DistrictCourt was entirely correct in offsetting$36,400 of the $49,500 note. The husband also testified that a portion of the loan represented child support payments and personal livingexpenses. Apparently a portion of the remaining balance of the loan represents the unpaid balance ofthe operating loan from prioryears. Evidence also reveals that the only proceeds used to purchase capital assets following the separation were $7,500 to purchase a combine and approximately$6,000 topurchase a pickup truck. Both purchases occurred in1978. Thus, the DistrictCourt was faced withwhether 

### or not to include any, a part or all of the unquantified balance of $13,100, which represented childsupport, personal expenses, andprior borrowings. This was a difficult question, largely accounting oriented. We find the District Court's reasoning in the previously quoted memorandum persuasive. Gerald Krum operated the family farm entirely on his own for theyears 1978 and 1979 and was entitledtothe profit and loss from the operation. The entire portionof the loan representing operating expense should be absorbed by him, and the only items which could rationally be deducted from the estate were the amounts attributable tothe acquisition of farm equipment. Depending upon the accounting method used, this amount could be a proportionate amount of the $13,500 equipment purchased in1978 or nothing 

### if the first-in first-out accounting method isused. We find the omission of the $49,500 noteto be reasonable under the circumstances of this case. With regard to the valuation date issue, 

### it isadmitted in appellant's brief that the valuationwill not alterthe result in the present case since the appreciation inland afterthe separationwas nearly equal to the depreciation of equipment. The only authority presented by appellant issection40-2-206, MCA, which pertains to earnings and accumulations of a married person while livingseparate from his spouse. The only increase inasset values between the date of separation and the date of dissolution

was the appreciation of land, which can hardly be characterized

as an accumulation solely ofGerald Krum since the property is heldjointly. The value of farm equipment infact declined due todepreciation. Consistent with InreMarriage of Krarner (19781, Mont. 

## , 580 P.2d 439, 35 St.Rep. 700, and Hamilton

v. Hamilton (1980), Mont 

## ,607 P.2d 102, 37 St.Rep. 247,

we find the date of dissolution to be the date of valuation of the marital estate. Affirmed.



# ................................. Chief Justice