Court Opinion

ID: 880250
Source: CourtListenerOpinion
Date Created: 2013-06-04 23:59:11.781497+00
Date Added: 2024-06-11T13:02:33.643073
License: Public Domain

No. 89-250

               IN THE SUPREME COURT OF THE STATE OF MONTANA
                                      1989

IN RE THE MARRIAGE OF
JUDY K. NOVAKOVICH,
                Petitioner and Appellant,
         and
RANDY NOVAKOVICH,
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                Respondent and Respondent.                        ,.,.
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APPEAL FROM:    District Court of the Thirteenth Judicial District,
                In and for the County of Carbon,
                The Hoporable Robert Holmstrom, Judge presidinq.
COUNSEL OF RECORD:
         For Appellant:
                Linda I.,. Harris; Harris    &   Ventrell, Billings, Montana

         For Respondent:
                A.   M.   Kendal-1, Red Lodge, Montana

                                      Submitted on Briefs:     Nov. 21, 1989
                                        Decided:    December 14, 1989

Filed:
Justice R. C. McDonough delivered the Opinion of the Court.

        The   wife   Judy   K.   Novakovich   appeals   the   decree   of
dissolution of the Thirteenth Judicial District Court,
Yellowstone County, distributing the marital estate of the
wife and her husband, Randy Novakovich.    We affirm.   Wife
raises a sole issue on appeal: Did the District Court abuse
its discretion in the distribution of the marital estate
because it discounted the value of the husband's interest in
a partnership known as The Bridger-Byron Cable TV Company?
     The parties were married on July 23, 1977, in
Thermopolis, Wyoming. They have two minor children. In the
spring of 1981 the husband entered into a partnership with
his brother to build and maintain a cable television system
for Bridger, Montana and Byron, Wyoming.    Husband and his
brother are equal partners in the television system and
husband's principal occupation is to maintain the television
system.
     The wife filed a petition for dissolution in February
1988, and the matter was tried on October 17, 1988. Prior to
the trial, the parties stipulated the resolution of the child.
custody and support issues.       On December 6, 1988, the
District Court filed its findings of fact and conclusions of
law. The Court entered the Decree of Dissolution on March 1,
1989.
     At the hearing, husband's expert, a certified public
accountant with considerable experience in valuing small
businesses, testified that the value of The Bridger-Byron
Cable TV Company based on its proven earnings history was
approximately $50,700.00.  The expert also applied a 35%
discount to the husband's          interest in the Company on the
grounds that the husband's interest in the Company was not a
controlling interest.        Wife's expert, who had bought and sold
several small cable TV businesses, testified that the market
val.ue of the business was $198,000.00.
     The District Court adopted the value                of     the wife's
expert--$198,000.00--but applied the   35% discount rate of
husband's expert to the husband's      50% interest.       This
established a value of $65,000.00 as husband's interest in
the partnership.    This amount was then included in the
marital estate and distributed accordingly. On appeal, the
wife contends that application of the 35% discount to the
husband's interest in the business amo.unts to an ab.use of the
District Court's discretion in evaluating the marital estate.
     "In valuing the assets in a marital dissolution case, it
must be noted that the District Court has broad discretion to
determine net worth." In re the Marriage of Johnston (1986),
223 Mont. 383, 387-388, 726 P.2d 322, 325.     The test for
reviewing such discretion is:           Did the District Court, in the
exercise of its discretion act arbitrarily without employment
of conscientious judgment, or exceed the bounds of reason in
view of all the circumstances?    Buxbaum v. Ruxbaum f19841,
214 Mont. 1, 7, 692 P.2d 411, 414.
     Even though as a partner the husband could force the
dissolution of the partnership and the liquidation of its
assets, the District Court found that the husband's interest
in   the   partnership     is not   as valuable       as a    controlling
interest. Because of this lack of control, the court found
that the 35% discount rate was not unreasonable.
     We agree.      We have recognized that discounting a
spo,use's interest in a business for purposes of inclusion in
the marital estate is applicable to partnership interests as
well as shares of stock in a corporation.   - In re the
                                            See
Marriage of Cole (1988), 763 P.2d 39, 45 St.Rep. 1965. A
partner's interest in the partnership is his share of the
profits    and   surplus    and   the    same   is   personal    property.
Section 35-10-503, MCA.      A partner's rights in specific
partnership property is that of a co-owner with the other
partners holding as tenants in partnership.          Section
35-10-502 (1), MCA.   An individual partner's rights in such
property    is    generally    not   assignable.     Section
35-10-502 (2)(b), MCA.     Thus even a partner with a 50%
interest is unable to assign any control of the partnership:
     A conveyance by a partner of his interest in the
     partnership does not of itself dissolve the
     partnership or ..                         ...
                          . entitle the assignee     to
     interfere in the management or administration of
     the partnership business or affairs. . .   .    -
                                                     It
     merely entitles the assignee - receive in
                                         to
     accordance with -
                 - hiscontract the profits to which
     the assigning partner would otherwise - ertitled.
                                             be
Section 35-10-504(1), MCA.   (Emphasis added.) Thus, while a
partner may have management rights in the partnership,
generally that partner cannot transfer such management
rights. This inability of a partner to transfer management
rights, regardless of the size of the partner's interest,
decreases the merchantability of even a large partnership
interest.    The inalienability of these management rights
would make discounting appropriate in some cases, as an
interest would be worth less in the hands of an assignee than
in the hands of a partner.
     Husband and his brother would have to dissolve the
partnership for husband to realize his full share of the
value of the partnership.     Once dissolved and the assets
liquidated, the business would be worth considerably less to
the husband and the husband would be unemployed.          The
District Court did not abuse its discretion in discounting
the husband's interest prior to including the partnership
interest in the marital estate.
    AFFIRMED.
We Concur:

      ief Justice