MARRIAGE OF KRUM

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80-04 IN THE SUPREME COURT OF THE STATE OF MONTANA 1980 IN RE THE MARRIAGE OF LINDA KRUM, Petitioner and Respondent, GERALD JACOB KRUM, Respondent and Appellant. Appeal from: District Court of the Thirteenth Judicial District, In and for the County of Yellowstone. Honorable Charles Luedke, Judge presiding. Counsel of Record: For Appellant: R. P. Ryan, Billings, Montana For Respondent: George T. Radovich, Billings, Montana Submitted on briefs: April 25, 1980 ~ecided: 3gL 26 19@ Filed: J[~L jqB[) Mr. C h i e f J u s t i c e F r a n k I. H a s w e l l d e l i v e r e d t h e O p i n i o n o f t h e Court. G e r a l d Krum a p p e a l s f r o m t h e p r o p e r t y s e t t l e m e n t p r o v i s i o n s o f a d i v o r c e decree entered i n t h e Yellowstone County D i s t r i c t Court. G e r a l d and L i n d a K r u m w e r e m a r r i e d i n 1 9 6 4 . They were s e p a r a t e d b r i e f l y i n 1976 and were p e r m a n e n t l y s e p a r a t e d i n December, 1977. L i n d a f i l e d f o r d i v o r c e on A u g u s t 3 0 , t r i a l was h e l d on A u g u s t 1 6 , 1 9 7 9 , i t s findings of fact, t i o n on O c t o b e r 2 5 , 1978, the and t h e D i s t r i c t C o u r t e n t e r e d c o n c l u s i o n s o f law, and d e c r e e o f d i s s o l u - 1979. U n t i l December, 1977, b o t h h u s b a n d and w i f e t o o k a n a c t i v e p a r t i n the family farming operation located near Huntley, Montana. Following the separation, L i n d a li v e d i n t h e f a m i l y ' s t r a i l e r home w i t h t h e p a r t i e s ' t w o c h i l d r e n . an a c t i v e p a r t i n t h e f a r m i n g o p e r a t i o n , She n o l o n g e r t o o k a l t h o u g h she d i d n o t i n t e r f e r e w i t h G e r a l d ' s u s e o f t h e l a n d and e q u i p m e n t w h i c h was h e l d i n t h e i r j o i n t name. F o l l o w i n g t h e s e p a r a t i o n , J e r r y con- t i n u e d t o o p e r a t e t h e f a r m and r e c e i v e d a l l t h e p r o f i t and l o s s from the operations. He p a i d L i n d a $ 5 0 0 p e r m o n t h i n c h i l d s u p - p o r t i n a d d i t i o n t o a l l o w i n g h e r t h e u s e o f t h e f a m i l y home. L i n d a b e g a n w o r k i n g p a r t t i m e as a l e g a l s e c r e t a r y - r e c e p t i o n i s t and a t t e n d i n g E a s t e r n Montana C o l l e g e . The p r i n c i p a l a s s e t s o f t h e m a r i t a l e s t a t e were 1 2 0 a c r e s o f i r r i g a t e d farm l a n d , acquired from G e r a l d ' s p a r e n t s i n 1975 t h r o u g h a c o n t r a c t f o r deed, and f a r m m a c h i n e r y , acquired p a r t l y f r o m G e r a l d ' s p a r e n t s and p a r t l y d u r i n g t h e m a r r i a g e and a f t e r separation. The p r i n c i p a l l i a b i l i t i e s were t h e amount o w i n g on t h e c o n t r a c t f o r deed and a f l u c t u a t i n g f a r m o p e r a t i n g l o a n . T h e D i s t r i c t C o u r t made t h e f o l l o w i n g v a l u a t i o n o f t h e m a r i t a l e s t a t e as o f t h e t r i a l d a t e : MARITAL ESTATE $165,000.00 Farm Land - Balance owing 73,000.00 $ 92,000.00 Farm Equipment : $ 13,560.00 44,880.00 12,800.00 From r e s p o n d e n t ' s f a t h e r During marriage Since separation M o b i l e Home ( i n p l a c e ) Savings Account Keogh P l a n ( d i s c o u n t e d ) 1 9 7 8 P o n t i ac ( a c t u a l e q u i t y ) Horse Furniture TOTAL $185,840.00 The D i s t r i c t C o u r t a l s o f o u n d t h a t h u s b a n d and w i f e had contributed equally t o the accumulation o f the marital estate p r i o r t o t h e s e p a r a t i o n and t h a t a l t h o u g h L i n d a d i d n o t f u n c t i o n as a m a r i t a l p a r t n e r f o l l o w i n g t h e s e p a r a t i o n , her u n f u l f i l led o b l i g a t i o n was o f f s e t b y G e r a l d ' s u s e o f h e r i n t e r e s t i n t h e l a n d and machinery. As a r e s u l t , the D i s t r i c t Court entered a divorce d e c r e e which r e q u i r e d G e r a l d t o p r o v i d e s u p p o r t o f $250 p e r month p e r c h i l d and made t h e f o l l o w i n g e q u a l p r o p e r t y d i v i s i o n : TO - PETITIONER LINDA A N N KRUM: M o b i l e Home and 5 a c r e s o f f a r m s t e a d $ 27,000.00 Savings Account 2,000.00 1978 P o n t i a c ( n e t ) 1,500.00 Horse 100.00 Furniture 500.00 61,820.00 Cash Payment G R A N D TOTAL $ 92,920.00 TO - RESPONDENT GERALD JACOB K R U M : Farm Land ( n e t ) F a r m E q u i p m e n t and p i c k u p t r u c k 71,240.00 Keogh P l a n 6,500.00 TOTAL $154,740.00 - LESS c a s h p a y m e n t t o p e t i t i o n e r - 92,920.00 $ F I N A L TOTAL It w i l l be n o t e d t h a t t h i s d i v i s i o n d o e s n o t make p r o v i - s i o n f o r the farm operating loan. tuates considerably. The a m o u n t o f t h i s l o a n f l u c - The l o w e s t i t has been i n t h e l a s t seven o r e i g h t y e a r s i s a p p r o x i m a t e l y $7,000 on t h e date o f t r i a l . was $ 2 8 , 0 0 0 61,820.00 a n d t h e h i g h e s t was $ 4 9 , 5 0 0 T h e n o t e b a l a n c e on t h e d a t e o f s e p a r a t i o n a n d t h e b a l a n c e on A p r i l 1, 1 9 7 9 , was $ 2 2 , 0 0 0 . p r o c e e d s h a v e b e e n u s e d f o r f a r m e x p e n s e s and p e r s o n a l The items. The t e s t i m o n y a t t r i a l does n o t r e v e a l t h e e x a c t d i s p o s i t i o n o f t h e p r o c e e d s and n o a t t e m p t was made t o q u a n t i f y t h e a m o u n t s . G e r a l d t e s t i f i e d t h a t t h e b a l a n c e on t h e n o t e i s d i r e c t l y r e l a t e d t o t h e i n c o m e t h a t w i l l come o u t o f t h e f a r m f o r 1 9 7 9 . m a t e d t h a t a p p r o x i m a t e l y $35,000 expenses. He e s t i - i s a t t r i b u t a b l e t o 1979 f a r m A l s o a p i c k u p t r u c k and c o m b i n e w e r e p u r c h a s e d through t h e borrowings. Gerald also t e s t i f i e d t h a t portions of t h e n o t e were used t o pay c h i l d s u p p o r t , t o buy p e r s o n a l and t o r e p a i r h i s c u r r e n t l e a s e d r e s i d e n c e . The items, l a s t expense w i l l be r e i m b u r s e d i n t h e f u t u r e . G e r a l d K r u m moved t o amend t h e f i n d i n g s , c o n c l u s i o n s and decree t o include the operating loan i n the net marital estate a n d t o v a l u e t h e e s t a t e as o f t h e d a t e o f s e p a r a t i o n i n D e c e m b e r , 1977, instead o f the date o f t r i a l . The D i s t r i c t C o u r t e n t e r e d an o r d e r denying t h e husband's motion. I n an a t t a c h e d memorandum t h e court stated: "The p r i m a r y a d j u s t m e n t b e i n g u r g e d b y r e s p o n d e n t i n h i s m o t i o n t o amend F i n d i n g s and C o n c l u s i o n s , and t h e p r i n c i p a l c o g n i z a b l e one, i s t o i n c o r p o r a t e i n t o m a r i t a l e s t a t e c a l c u l a t i o n s t h e amount o f t h e f a r m o p e r a t i n g l o a n w h i c h , a t t h e t i m e o f t r i a l , was $49,500.00. T h i s l o a n a c c o u n t e x i s t s upon a cont i n u i n g b a s i s , i s r e n e w e d a n n u a l l y , and f l u c t u a t e s I t was i n t e n t i o n a l l y o m i t t e d i n t h e C o u r t ' s widely. c a l c u l a t i o n s because o f a l a c k o f s u f f i c i e n t i n f o r m a t i o n t o do o t h e r w i s e . F o r example: The e v i d e n c e showed t h a t r e s p o n d e n t p u r c h a s e d a combine, a p i c k u p t r u c k , a c a m p e r s h e 1 1 , CB r a d i o and s t e r e o i n 1978, a f t e r t h e p a r t i e s separated, f o r a t o t a l c o s t o f $12,800.00. The money f o r t h e s e p u r c h a s e s came f r o m t h e o p e r a t i n g l o a n and, as a c o n s e q u e n c e , n o s p e c i f i c e n c u m b r a n c e became imposed upon t h e equipment i t s e l f and, a l t h o u g h t h e e v i d e n c e a d v i s e s t h a t some $ 2 2 , 0 0 0 . 0 0 i n p a y m e n t s w e r e made u p o n t h e l o a n i n 1 9 7 8 , t h e r e i s no i t e m i z a t i o n g i v e n t o show t h e r e l a t i o n s h i p o f such payments t o t h e i n d e b t e d n e s s i n c u r r e d i n p u r c h a s i n g t h i s equipment; so i t s n e t e q u i t y i s impossible o f determi n a t i o n under t h e evidence presented. C o n s e q u e n t l y , t h e C o u r t was l e f t w i t h the alternative of e i t h e r using the p u r c h a s e p r i c e as t h e v a l u e t o t h e m a r i t a l e s t a t e as t h o u g h i t was p a i d i n f u l l , o r c o n s i d e r i n g i t encumbered t o i t s f u l l v a l u e and, t h e r e f o r e , h a v i n g no e q u i t y w h a t e v e r . O b v i o u s l y , i t i s n o t v a l u e l e s s , so t h e f i r s t a l t e r n a t i v e had t o a p p l y . " F u r t h e r , i n c o n n e c t i o n w i t h u s i n g t h e whole a m o u n t o f t h e l o a n b a l a n c e as a d e d u c t i o n f r o m m a r i t a l a s s e t s , as i s u r g e d b y t h e r e s p o n d e n t , i t appears t h a t t h e proceeds from t h e operat i n g l o a n a r e used l a r g e l y f o r n o n c a p i t a l expenses, b e i n g $35,000.00 i n 1979 t o d a t e o f trial. These expenses have no r e l a t i o n s h i p t o a d e t e r m i n a t i o n o f m a r i t a l a s s e t s when t h e f a r m p r o c e e d s a r e e x c l u d e d as h a s b e e n t h e c a s e h e r e . Even i f i n c l u d e d , however, i n t h e c i r c u m s t a n c e s o f t h e s e p a r t i e s t h e r e w o u l d be a p r o b l e m o f d e t a i l e d a c c o u n t i n g t o d e t e r m i n e w h i c h expend i t u r e s a r e r e l e v a n t t o t h e m a r r i a g e and t h e m a r i t a l a s s e t s o f t h e s e p a r t i e s and w h i c h a r e not. Also, it would very l i k e l y r e q u i r e a r e c o n c i 1i a t i o n o f t h e o p e r a t i n g l o a n account o v e r s e v e r a l y e a r s i n t h e p a s t , as w e l l as i n t o t h e f u t u r e , b y reason o f t h e mechanics o f i t s continuing operation. "The r e s p o n d e n t h a s h a d , and u n d e r t h e d e c r e e c o n t i n u e s t o have, t h e f a r m o p e r a t i o n e x c l u s i v e l y t o h i m s e l f , w i t h b o t h e x p e n s e s and i n c o m e h i s , as w e l l as a n y p r o f i t o r l o s s . T h a t was t h e b a s i s upon w h i c h t h e e v i d e n c e t e n d e r e d t h e i s s u e s t o t h e C o u r t f o r i t s d e c i s i o n and i t was o n t h a t b a s i s t h a t t h e m a t t e r h a d t o be decided." W i t h r e g a r d t o t h e f u t u r e proceeds, G e r a l d Krum t e s t i f i e d t h a t he c o u l d n o t e s t i m a t e t h e v a l u e o f h i s s u g a r b e e t s , corn, g r a i n a n d h a y c r o p s w h i c h w e r e g r o w i n g on t h e j o i n t l y owned l a n d a n d 2 6 0 a d d i t i o n a l a c r e s t h a t he l e a s e d . The D i s t r i c t C o u r t a l s o f o u n d no a u t h o r i t y t o s u p p o r t G e r a l d K r u m ' s c o n t e n t i o n t h a t t h e m a r i t a l e s t a t e s h o u l d be v a l u e d as o f t h e date o f s e p a r a t i o n r a t h e r t h a n t h e d a t e o f t r i a l . The f o l l o w i n g i s s u e s a r e r a i s e d on a p p e a l : ( 1 ) Whether t h e D i s t r i c t C o u r t committed r e v e r s i b l e e r r o r by r e f u s i n g t o deduct t h e value o f a farm o p e r a t i n g l o a n from the value of the marital estate; and ( 2 ) S h o u l d t h e n e t m a r i t a l e s t a t e be d e t e r m i n e d o n t h e d a t e o f s e p a r a t i o n o r on t h e d a t e o f d i s s o l u t i o n ? The d i s p o s i t i o n o f a m a r i t a l e s t a t e i s governed by s e c t i o n 40-4-202, MCA, and i s l a r g e l y w i t h i n t h e d i s c r e t i o n o f t h e D i s t r i c t Court. This Court w i l l not d i s t u r b the decision of the t r i a l c o u r t absent a c l e a r abuse o f d i s c r e t i o n . Eschenburg (1976), 1 7 1 Mont. 247, 5 5 7 P.2d 1014. E s c h e n b u r g v. The t e s t f o r abuse o f d i s c r e t i o n i s whether t h e t r i a l c o u r t a c t e d a r b i t r a r i l y w i t h o u t t h e employment o f c o n s c i o u s judgment o r exceeded t h e bounds o f reason. 421, 5 6 7 P.2d , Mont. I n r e Marriage o f Berthiaume (1977), 1 3 8 8 ; F r e d e r i c k s e n v. 6 0 5 P.2d Fredericksen (1980), 1135, 37 St.Rep. O f t h e $49,500 191. balance o f t h e farm operating loan, Geral d K r u m t e s t i f i e d t h a t he e s t i m a t e d t h a t $ 3 5 , 0 0 0 n o n c a p i t a l f a r m e x p e n s e s and $ 1 , 4 0 0 repairs. The $1,400 173 Mont. represented 1979 represented residence w i l l be r e i m b u r s e d b y t h e o w n e r o f t h e r e s i - d e n c e a t a l a t e r d a t e and t h e $35,000 w i l l be r e i m b u r s e d b y f a r m p r o f i t o r a b s o r b e d i n f a r m l o s s f r o m t h e 1 9 7 9 c r o p s and t h e s a l e o f cattle. N e i t h e r o f these f u t u r e proceeds were i n c l u d e d i n t h e marital estate; t h u s t h e D i s t r i c t C o u r t was e n t i r e l y c o r r e c t o f f s e t t i n g $36,400 o f t h e $49,500 note. i n The husband a l s o t e s t i f i e d t h a t a portion o f the loan represented c h i l d support payments and p e r s o n a l l i v i n g expenses. Apparently a portion of t h e remaining balance o f the loan represents t h e unpaid balance o f the operating loan from p r i o r years. Evidence also reveals t h a t t h e o n l y proceeds used t o purchase c a p i t a l t h e s e p a r a t i o n were $7,500 t e l y $6,000 assets following t o p u r c h a s e a c o m b i n e and a p p r o x i m a - t o purchase a pickup t r u c k . Both purchases occurred i n 1978. Thus, i n c l u d e any, $13,100, t h e D i s t r i c t C o u r t was f a c e d w i t h w h e t h e r or n o t t o a part o r a l l o f the unquantified balance o f which represented c h i l d support, p e r s o n a l expenses, and p r i o r borrowings. T h i s was a d i f f i c u l t q u e s t i o n , accounting oriented. largely We f i n d t h e D i s t r i c t C o u r t ' s r e a s o n i n g i n t h e p r e v i o u s l y q u o t e d memorandum p e r s u a s i v e . Geral d Krum o p e r a t e d t h e f a m i l y f a r m e n t i r e l y o n h i s own f o r t h e y e a r s 1 9 7 8 a n d 1 9 7 9 a n d was e n t i t l e d t o t h e p r o f i t and l o s s f r o m t h e operation. The e n t i r e p o r t i o n o f t h e l o a n r e p r e s e n t i n g o p e r a t i n g e x p e n s e s h o u l d be a b s o r b e d b y h i m , and t h e o n l y i t e m s w h i c h c o u l d r a t i o n a l l y be d e d u c t e d f r o m t h e e s t a t e w e r e t h e a m o u n t s a t t r i b u t a b l e t o t h e a c q u i s i t i o n o f farm equipment. a c c o u n t i n g method used, t h i s a m o u n t c o u l d be a p r o p o r t i o n a t e equipment purchased i n 1978 o r n o t h i n g i f amount o f t h e $13,500 the first-in Depending upon t h e first-out a c c o u n t i n g method i s used. o m i s s i o n o f t h e $49,500 We f i n d t h e n o t e t o be r e a s o n a b l e u n d e r t h e c i r - cumstances o f t h i s case. With regard t o the valuation date issue, appellant's b r i e f that the valuation w i l l it i s admitted i n not a l t e r the r e s u l t i n t h e p r e s e n t case s i n c e t h e a p p r e c i a t i o n i n l a n d a f t e r t h e separat i o n was n e a r l y e q u a l t o t h e d e p r e c i a t i o n o f e q u i p m e n t . a u t h o r i t y p r e s e n t e d b y appel l a n t i s s e c t i o n 40-2-206, The o n l y MCA, which p e r t a i n s t o e a r n i n g s and a c c u m u l a t i o n s o f a m a r r i e d p e r s o n w h i l e l i v i n g s e p a r a t e f r o m h i s spouse. The o n l y i n c r e a s e i n a s s e t v a l u e s between t h e d a t e o f s e p a r a t i o n and t h e d a t e o f d i s s o l u t i o n was t h e a p p r e c i a t i o n o f l a n d , w h i c h c a n h a r d l y be c h a r a c t e r i z e d a s an a c c u m u l a t i o n s o l e l y o f G e r a l d K r u m s i n c e t h e p r o p e r t y i s held jointly. The v a l u e o f f a r m e q u i p m e n t i n f a c t d e c l i n e d due t o depreciation. (19781, v. C o n s i s t e n t w i t h I n r e M a r r i a g e o f Krarner Mont. Hamilton (1980), , 5 8 0 P.2d 4 3 9 , Mont , 3 5 St.Rep. 6 0 7 P.2d 700, and H a m i l t o n 1 0 2 , 3 7 St.Rep. 247, we f i n d t h e d a t e o f d i s s o l u t i o n t o be t h e d a t e o f v a l u a t i o n o f the marital estate. Affirmed. ................................. Chief Justice

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