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No. 97-648

IN THE SUPREME COURT OF THE STATE OF MONTANA

1998 MT 183N

IN RE THE MARRIAGE OF

M. AMY HAUGHTON,

Petitioner, Respondent and Cross-Appellant,

and

FRANK B. HAUGHTON, JR.,

Respondent, Appellant and Cross-Respondent.

 APPEAL FROM: District Court of the Thirteenth Judicial District,

In and for the County of Yellowstone,

The Honorable Russell C. Fagg, Judge presiding.

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COUNSEL OF RECORD:

For Appellant:

Donald L. Harris, Christopher Manger, Jr.; Crowley, Haughey,

Hanson, Toole & Dietrich, Billings, Montana

For Respondent:

Vernon E. Woodward; Hendrickson, Everson, Noennig & 

Woodward, Billings, Montana

Submitted on Briefs: June 25, 1998

Decided: July 21, 1998

Filed:

 _______________________________________

Clerk

Justice W. William Leaphart delivered the Opinion of the Court.

¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court 1996 Internal 

Operating Rules, the following decision shall not be cited as precedent but shall be 

filed as a public document with the Clerk of the Supreme Court and shall be 

reported by case title, Supreme Court cause number, and result to the State Reporter 

Publishing Company and to West Group in the quarterly table of noncitable cases 

issued by this Court.

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¶2 Frank B. Haughton (Frank) appeals from the decision of the Thirteenth Judicial 

District Court, Yellowstone County, dissolving the marriage between Frank and M. 

Amy Haughton (Amy), distributing the marital property and awarding child support 

to Amy. Amy cross-appeals the issue of whether the District Court improperly 

allowed evidence of marital misconduct. We affirm.

Statement of the Facts

¶3 Frank and Amy were married in Midland, Texas on December 1, 1984. Two 

children were born of the marriage, Ellie, born July 10, 1987, and Ben, born 

September 6, 1989. Throughout the marriage, Frank was self-employed as an 

independent landman in the oil and gas business. Amy has a finance degree and was 

employed as a bank officer prior to the birth of their first child. After Ellie's birth, 

however, Amy was essentially a full-time homemaker and performed office work for 

Frank's business. At the time of trial, Amy was working part time as an 

administrative assistant at the Billings Deaconess Health Center, had approximately 

$10,000 in income from a jewelry business she began in 1994, and received $1,100 per 

year in rental income from her interest in a family ranch. The District Court found 

that Amy's ties to Texas and her father's prominence in the oil business opened many 

doors for Frank. In addition, Amy received a $40,000 inheritance in 1991 which was 

invested in the oil and gas business. 

¶4 The parties were quite frugal with their money. Other than purchasing a 

Suburban in 1993, the parties made no major purchases during the course of their 

marriage. All of the parties' money was invested in Frank's oil and gas business in 

hopes that one day their investments would create a comfortable retirement.

¶5 The couple began experiencing marital problems in approximately 1995 which 

Frank attributes to Amy's affair with another man. Frank and Amy began marriage 

counseling in the fall of 1995 with Bob Bakko. Mr. Bakko testified that Amy was 

sincere in her effort to preserve her marriage. Nevertheless, Frank moved out of the 

family home in March 1996. A decision to divorce had not at that time been made, 

and Frank moved back in at the end of April. Amy petitioned for dissolution in May 

1996 and moved out in July 1996. During their separation and through the time of 

trial, Frank and Amy's income was deposited in their joint account and bills were 

paid out of the joint account.

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¶6 Of significance is the fact that, in 1995 and 1996, the parties' investments finally 

began to pay off. On August 1, 1995, the parties had a total net worth of 

approximately $275,911, but by January 16, 1997, their total net worth had grown to 

$479,081. This increase in net worth resulted from two factors: 1) Conoco prepaid 

Frank and his partners $650,000 for leases and work to be performed in 1997 and 

1998; and 2) Frank entered into a contract with JN Oil and Gas involving the 

Hudson Ranch Project for which he received approximately $300,000 (half paid in 

July 1996 and half to be paid in March 1997). During the course of the marriage, the 

parties gross income varied significantly from year to year ranging from $13,212 to 

$137,632. However, Frank testified that in 1996 he earned $280,000 and in 1997 

approximately $320,000.

¶7 Prior to trial, Frank and Amy agreed to a joint custody arrangement which the 

District Court incorporated into the final decree. The parties requested that the 

court distribute the marital property. The District Court determined that an equal 

division of the marital estate was the most equitable division. The parties agreed to 

the value of most of their assets, with a few notable exceptions. The court determined 

that, because of the nature of the oil and gas business and the land holdings of the 

parties, it was in the best interest that Amy not receive specific pieces of property, 

but rather, that Frank purchase her interest in those assets. 

¶8 As to child support, the court determined that Frank should pay child support to 

Amy based on the Montana Child Support Guidelines. In addition, the court ordered 

that child support be reviewed in one year to allow the parties a period of time to 

evaluate their incomes. The court ordered the parties to exchange support 

calculations based on an average income of over $60,000 for Frank and attempt to 

agree to the amount of child support. However, the parties were unable to stipulate 

and the District Court later adopted the $1,589 per month support amount proposed 

by Amy.

¶9 Frank appeals from the District Court's findings of fact and conclusions of law. 

We address three issues on appeal:

¶10 1) Did the District Court clearly err in distributing the marital estate?

¶11 2) Did the District Court err in denying Frank's motion to partially allow him to 

satisfy the amount owing to Amy by transferring oil and gas properties as a 

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substitute for cash and in denying Frank's related motion for a new trial?

¶12 3) Did the District Court abuse its discretion in calculating child support? 

Amy presents one issue on cross-appeal: Did the District Court err in allowing Frank to 

introduce evidence of marital misconduct during the property distribution stage of the 

hearing?

Discussion 

I

¶13 1) Did the District Court clearly err in distributing the marital estate?

¶14 This Court reviews a District Court's findings regarding distribution of a marital 

estate to determine whether the District Court clearly erred. The clearly erroneous 

standard involves a three-part test: 

1) the Court will review the record to see if the findings are supported by 

substantial evidence; 2) if the findings are supported by substantial evidence, 

the Court determines if the trial court has misapprehended the effect of the 

evidence; and 3) if substantial evidence exists and the effect of the evidence 

has not been misapprehended, the Court may still find that "a finding is 

clearly erroneous when, although there is evidence to support it, a review of 

the record leaves the court with the definite and firm conviction that a mistake 

has been committed." 

Pfeifer v. Pfeifer (1997), 282 Mont. 461, 467, 938 P.2d 684, 688 (citations omitted). Frank 

asserts that the District Court clearly erred in distributing the marital estate by incorrectly 

valuing certain oil and gas properties, incorrectly valuing the marital estate at the time of 

dissolution, treating deferred income as an asset, and failing to deduct the tax liability 

created by the court's distribution. 

¶15 The most significant error alleged by Frank is that the District Court erred in 

adopting the values proposed by Amy's expert regarding four properties: the Big 

Snowy project, the Bowman County property, the Slope County property and the 

Golden Valley County property. Frank argues that there is no substantial evidence to 

support the District Court's findings regarding the value of the properties. 

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Moreover, Frank asserts that the District Court relied on irrelevant factors in 

valuing those properties. 

¶16 The parties presented extensive expert testimony regarding the value of the 

properties. For the most part, the experts agreed regarding the value of the holdings 

of Frank and Amy. The notable differences being to the value of the Big Snowy 

project and the Bowman, Slope and Golden Valley properties. Frank's expert 

testified that the four properties were virtually worthless because the cost to 

maintain those properties exceeded their value. On the other hand, Amy's expert 

testified that the properties were valuable. Most significantly, Amy's expert 

explained that the Big Snowy project involved the land deal with Conoco which had 

already earned a large sum of money and that Conoco was exercising additional 

options which would further increase the value of the project. In addition, Amy's 

expert characterized the Bowman property as being in the "heart of the play." He 

further explained that Bowman is possibly the most active exploration area in the 

United States and the success ratio for finding oil is high. 

¶17 The District Court determined that the values should be equitably set somewhere 

between the figures presented by opposing experts. The court found it significant 

that one of Amy's experts was a petroleum engineer, whom the court found was more 

qualified to value producing properties using the decline curve method. The court 

further explained that it found Amy's values more credible because she was willing 

to buy out Frank's interest in the property based on her values. The court found 

inconsistent the fact that Frank specifically requested that the proceedings be 

confidential because of the valuable nature of the land deals with Conoco, yet his 

expert testified that the land involved in the Conoco deal was worthless. As a result, 

the court adopted the values proposed by Amy's expert, but discounted the values by 

ten percent. The District Court determined that the equities demanded a value closer 

to that proposed by Amy. There is substantial credible evidence to support the 

District Court's valuation of the properties.

¶18 In addition, Frank contends that the District Court erred in valuing the marital 

estate at the time of trial instead of at the time he contends that the marriage was 

over. Frank asserts that when Amy began her extramarital affair she effectively 

ended the marriage. Notably, as a result of the Conoco and Hudson Ranch deals, the 

parties' financial status changed dramatically during the period of time that Frank 

and Amy were experiencing marital difficulties. Frank argues that the marital estate 

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should be valued as of August 1995, prior to the land deals, as opposed to March 

1997, the time of trial.

¶19 However, this Court has stated that the proper time for valuing the marital 

estate cannot always be tied to some specific time or event in the dissolution process 

and the district court must exercise discretion in determining the proper time. In re 

Marriage of Lopez (1992), 255 Mont. 238, 244, 841 P.2d 1122, 1125. The District 

Court in this case found the testimony of the counselor, Mr. Bakko, to be helpful in 

determining when to value the marital estate. Specifically, the court found that 

Amy's relationship with another person was not indicative of the end of the 

marriage. Rather, the court found the fact that the parties continued to try to 

reconcile and continued to maintain joint accounts more persuasive as to the 

duration of the marriage. Therefore, the court determined that it was appropriate to 

follow the general rule and value the marital estate at the time of actual dissolution. 

See In re Marriage of Walls (1996), 278 Mont. 413, 417, 925 P.2d 483, 485. The 

District Court did not abuse its discretion in valuing the marital estate at the time of 

dissolution.

¶20 Frank also alleges that the District Court erred in valuing the marital estate by 

treating deferred income as an asset and by failing to deduct the tax liability created 

by the court's distribution. As to Frank's assertion that the court treated deferred 

income as an asset, Frank alleges that the court erred in treating the Conoco 

prepayment as an asset for purposes of distributing the marital estate. Frank does 

not direct this Court to any authority supporting his argument that the court erred 

in its valuation. 

¶21 We determine that § 40-4-202, MCA, gives the District Court broad discretion to 

consider a number of factors in distributing the marital estate. The District Court 

considered the fact that no maintenance was being awarded and that Amy had 

relatively few opportunities for future acquisition of capital assets and income in 

comparison to Frank. Moreover, the court found that the parties had been 

developing their interests in oil and gas deals throughout the marriage and are only 

now reaping significant monetary gain. The court stated that "the fact remains that 

the Conoco deal and the Hudson Ranch deal were started while the parties were 

married," therefore the District Court determined that it would be equitable to 

award Amy a portion of the gain achieved by those deals. The District Court did not 

abuse its discretion in treating the Conoco prepayment as an asset for purposes of 

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distributing the marital estate.

¶22 Frank further argues that the District Court erred in failing to deduct tax 

liabilities from the value of the marital estate. In support of his argument, Frank 

asserts that he presented testimony by deposition of his accountant which indicated 

that state and federal taxes on the sale of Frank's oil and gas properties would total 

$33,000. Frank claims that the District Court's failure to include this tax liability in 

the value of the estate was an error. Frank cites In re Marriage of Lee (1991), 249 

Mont. 516, 816 P.2d 1076, in support of this claim. 

¶23 Marriage of Lee, however, stands for the proposition that where a property 

distribution ordered by the court includes a taxable event "precipitating a concrete 

and immediate tax liability," such tax liability should be considered by the court in 

entering its final judgment. Marriage of Lee, 249 Mont. at 519, 816 P.2d at 1078. The 

District Court in this case did not order Frank to sell his oil and gas properties. In 

fact, the District Court sought to preserve those properties. The District Court did 

not order any action by Frank that would include a taxable event. The District Court 

did not err in failing to deduct tax liabilities from the value of the marital estate.

¶24 In sum, the District Court did not err in adopting the valuations of property 

proposed by Amy's expert. The District Court did not abuse its discretion in valuing 

the marital estate as of the time of dissolution. Finally, the District Court did not err 

in considering the Conoco prepayment an asset for purposes of distributing the 

marital estate nor in failing to deduct tax liabilities from the value of the marital 

estate. 

II

¶25 2) Did the District Court err in denying Frank's motion to partially allow him to 

satisfy the amount owing to Amy by transferring oil and gas properties as a 

substitute for cash and in denying Frank's related motion for a new trial?

¶26 At trial, Frank specifically requested that the oil and gas properties not be 

divided and he expressed concern that his partners would not want Amy substituted 

as a partner. As a result, the District Court determined it was best to keep the 

properties intact and have Frank buy out Amy's interest. After the court accepted 

Amy's valuations of the property, Frank determined he had insufficient liquid assets 

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to buy out Amy's interest and moved the court to allow him to satisfy the debt by 

transferring oil and gas properties. The court denied Frank's request. Frank asserts 

that the District Court erred in denying his motion to satisfy the equal division to 

Amy by conveying nonpartnership oil and gas properties in lieu of cash.

¶27 Specifically, the District Court determined that it would be unfair to allow Frank 

an opportunity to "unload his less desirable properties without input from [Amy] - 

this unilateral decision is not appropriate." The court left open the option for Amy 

and Frank to agree to a property settlement, but stated that if they could not agree, 

Frank must pay cash according to a payment schedule. 

¶28 Furthermore, Frank moved the District Court for a new trial in the event the 

court denied his motion to substitute property for cash. In his motion for a new trial, 

Frank requested that the District Court reconsider its valuations of the oil and gas 

properties. The District Court denied Frank's motion for a new trial, explaining that 

its valuations were supported by the evidence. The decision to grant or deny a new 

trial is within the sound discretion of the district court and will not be disturbed 

absent a showing of manifest abuse of discretion. Jim's Excavating Serv., Inc. v. 

HKM Assoc. (1994), 265 Mont. 494, 512, 878 P.2d 248, 259. The District Court did 

not abuse its discretion in denying Frank's motions.

III

¶29 3) Did the District Court abuse its discretion in calculating child support? 

¶30 Frank contends that the District Court abused its discretion in calculating the 

amount of child support. The crux of Frank's argument is that the court should have 

included Amy's distribution from the marital estate as income to her in calculating 

child support. However, the court specifically found that the $338,000 that Frank 

owes Amy to equalize the marital distribution is not income to Amy for purposes of 

calculating support. This Court reviews a district court's award of child support to 

determine whether the district court abused its discretion. In re Marriage of Craib 

and Rhodes (1994), 266 Mont. 483, 490, 880 P.2d 1379, 1384. 

¶31 The court instructed the parties to exchange child support calculations based 

upon the Montana Child Support Guidelines. The District Court noted that if the 

parties were unable to stipulate to a child support amount, the court would 

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determine a child support amount based upon the proposed calculations submitted 

by the parties. Additionally, the court determined that child support should be 

reviewed in one year after the parties have more evidence of their incomes. 

¶32 The parties each submitted calculations based on the Montana Child Support 

Guidelines. Since the results of the calculations were dramatically different, Frank 

and Amy were unable to stipulate to an amount. As a result, Frank and Amy 

submitted the calculations to the District Court for an order regarding the amount of 

child support. The court adopted the calculation submitted by Amy's expert because 

Frank's expert had attributed Amy's portion of the marital estate to her as income. 

In fact, Frank's proposed calculations indicated that Amy would receive income 

exceeding $100,000 for the term of Frank's payments. As a result, Frank's 

calculations indicated that Amy should pay Frank $81 per month in child support. 

On the other hand, Amy's calculations were based on an income of $296,144 for 

Frank which was an average of his 1996 and 1997 incomes. Amy's calculations 

resulted in a monthly obligation of $1,589. 

¶33 Frank argues that the child support calculations submitted by Amy are not 

accurate because the amounts of the Conoco and Hudson Ranch project, which were 

considered by the court in valuing the marital estate, were attributed to him as 

income for purposes of calculating child support, but considered an asset for 

purposes of distribution to Amy.

¶34 In adopting Amy's calculations, the District Court relied on this Court's decision 

in In re Marriage of Widhalm (1996), 279 Mont. 97, 926 P.2d 748. In Marriage of 

Widhalm, the wife was awarded $70,000 for her interest in the ranch to be paid over 

a period of years. The husband argued that the amount paid to the wife should be 

attributed to her as income for purposes of calculating child support. This Court held 

that her portion of the marital estate, even though it is paid over a period of time, 

does not create some new or greater obligation on her part to the children, nor does 

it serve to convert her share of the marital property into newly acquired income. 

Marriage of Widhalm, 279 Mont. at 103, 926 P.2d at 752.

¶35 The District Court noted that the calculations proposed by Amy were based on 

incomes figures that were supported by the court's findings. The court further noted 

that the income figures used by Frank were incorrect. While the District Court 

acknowledged that the child support award was "a lot of money," the court also 

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acknowledged that "Frank earns a lot of money." Specifically, the District Court 

noted that Frank testified that his income in 1996 was approximately $280,000 and in 

1997 was approximately $320,000. The District Court said it was giving Frank the 

benefit of the doubt by averaging his income rather than just considering his income 

for 1997. Moreover, in recognition of the variable rate of Frank's income, the District 

Court required that child support be reviewed in one year. Section 40-4-204, MCA, 

provides that the amount of child support determined "under the guidelines is 

presumed to be an adequate and reasonable support award, unless the court finds by 

clear and convincing evidence that the application of the standards and guidelines is 

unjust to the child or to any of the parties or that it is inappropriate in that 

particular case." We determine that the child support award in this case is 

reasonable and just to the children and the parties. The District Court did not abuse 

its discretion in calculating child support.

IV

¶36 4) Did the District Court err in allowing Frank to introduce evidence of marital 

misconduct during the property distribution stage of the hearing?

¶37 Amy alleges, in her cross-appeal, that the District Court improperly allowed 

Frank to introduce evidence of marital misconduct during the property distribution 

stage of the hearing. Amy, however, does not assert that the court erred in 

distributing the marital estate or that the court valued the estate at an improper 

time. Rather, Amy seeks a directive from this Court to the District Court that it 

should not, in the future, allow evidence of marital misconduct. Amy asserts that 

Montana adopted the Uniform Marriage and Divorce Act because it eliminated the 

concept of fault in dissolutions. In essence, Amy asserts that the District Court erred 

in allowing Frank to make the argument that the marital estate should be valued at 

the time she allegedly began an extramarital affair. While we agree that the District 

Court should not consider marital misconduct in equitably apportioning the marital 

estate, we see no err in the court's ultimate distribution, nor has Amy alleged such an 

error. Affirmed.

/S/ W. WILLIAM LEAPHART 

We concur:

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/S/ J. A. TURNAGE

/S/ WILLIAM E. HUNT, SR.

/S/ JIM REGNIER 

/S/ KARLA M. GRAY

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