Opinion ID: 883153
Heading Depth: 2
Heading Rank: 1

Heading: Value of Crops

Text: In setting a value for the marital estate, the District Court included in the list of marital liabilities, the balance owed on the operating note for the farm. However, the court did not take into account the value of the crop grown with the help of the money borrowed. Appellant argues that this is error. Respondent contends that the court was correct in adding the $84,000 owed on the operating loan to the list of marital liabilities. Previous cases provide guidance for determining the effect of an operating loan on a property settlement. In the Marriage of Krum (1980), 188 Mont. 498, 614 P.2d 525, we considered the district court's action of offsetting the balance of the operating loan with the value of the future proceeds of the farm's crops. Krum, 188 Mont. at 503, 614 P.2d 525. We determined that the court was correct in subtracting the value of crops from the amount owed on the loan and attributing the remainder of the balance owed to the marital estate. In the Halverson case, we approved the same accounting method of considering the crops as fruit of the operating loan: The husband's 1984 farming operation is easily accounted for. The husband had complete control and, fairly, should be held responsible for the 1984 results. Equitably, it is fair to charge him with the December 1984, Federal Land Bank payment for the use he made of the family farm in 1984. He, then, would also be entitled to the fruits of his 1984 crop efforts which he, in fact, had. (Emphasis added.) Marriage of Halverson, 230 Mont. 226, 230, 749 P.2d 518, 520. Because of the timing of the dissolution in Halverson, the husband was attributed both the bank debt and the credit for the crops. In the present case, the dissolution occurred during the middle of the year and the bank debt was attributable to both parties as part of the marital estate. However, the court totally neglected to take into consideration the fruits of the operating loan. We find persuasive the testimony presented by Deanne's expert witness, Nicholas Bourdeau, a certified public accountant. He testified that when valuing a farm operation, the liability of a farm operating debt must be set against any value gained as a result of using the operating monies. He stated that: [Y]ou either count all the assets this money [the operating loan] bought, or you don't count any of the assets and don't count any of the note. Bourdeau explained to the court that when he valued the marital estate, he only had one side of the equation in the figures he had been given or could discover. That side of the equation was the amount of the operating loan which the Neals obtained each year and repaid to the lending institution when the crops were sold. The current operating loan amounted to $84,000. What he did not have were values for the current year-end crop yield because the crop was still in the ground. The money gained from the crop would go to repay the operating loan. On cross examination, Bourdeau was asked what the $36,947 figure in his valuation for crops meant. He explained that this figure had nothing to do with the crops in the ground or the enhanced value of the cattle  both attributable to the contentious $84,000 operating loan. The crop value listed on his report was the amount of crops on the property from a prior year's harvest. Bourdeau went on to state that it is very speculative and expensive when attempting to put a price on the value of crops in the ground and unharvested. Therefore, when he made his valuation of the marital property he had not speculated as to the value of the crops for this current year. Because he had no estimate as to the value of the crops, he preferred not to add the current operating loan figure of $84,000 on the liabilities side of the marital property valuation. He therefore excluded the $84,000 from the marital debts. If courts are going to consider the operating loan debt of a farming operation, it is only a fair consideration to offset that debt with the value of the crops gained by way of that operating loan. This may sometimes mean an expensive projection of future value onto a farm's crops. The alternative, and the one called for here, was to disallow an operating loan repaid from the current crop yield. It should have been an either-or situation. Either both operating loan and crops should have been considered or neither should have. We hold the court erred in considering the operating loan shown in the court's findings as an $84,000 liability to the marital estate. We reverse the District Court's valuation of the marital estate and remand for further consideration of the operating loan/crop-yield equation.