The Average Valuation Case

December 19, 2016 § Leave a comment

Three things are fundamental when it comes to equitable distribution:

  1. It’s incumbent on the chancellor to determine the fair market value of the assets before determining division; and
  2. It’s up to the parties to offer evidence of the values; and
  3. It’s up to the chancellor to determine the weight and credibility of the evidence.

When Chad and Catherine Potts showed up in court for their divorce in 2015, one item at issue was equitable division of the former marital residence and 40 acres of land. There was no dispute that the property was marital. Catherine presented a 2011 appraisal that valued the property at $138,000, and Chad offered an eight-month-old 2014 appraisal placing the value at $86,000. After quizzing Chad over the discrepancy between the two valuations, the chancellor averaged the two and determined the value to be $112,000.

Dissatisfied, Chad appealed, contending that the judge should have adopted his more recent value. On November 22, 2016, in Potts v. Potts, the COA affirmed. Judge Irving wrote for the unanimous court:

¶8. “Property division should be based upon a determination of fair market value of the assets, and these valuations should be the initial step before determining division.” Ferguson v. Ferguson, 639 So. 2d 921, 929 (Miss. 1994). Pursuant to Ferguson, Chad argues that the chancellor should have relied solely on the appraisal he submitted to the court because it was more recent and, therefore, a more accurate determination of the fair market value of the property at the time of the divorce. He asserts that the chancellor erred by applying an average of both appraisals that were submitted to the court rather than simply applying the most current appraised market value of the property.

¶9. Catherine responds that the chancellor was not in error in determining the value of the marital home and land by averaging the appraisals submitted by the parties. She argues that Chad’s appraisal showed a $52,000 reduction in the fair market value of the property, and no evidence was presented to the court explaining the reduction in value. In addition, she argues that the overall award in the case was fair, reasonable, and equitable.

¶10. “A chancellor is responsible for determining the fair market value of the marital assets.” McKnight v. McKnight, 951 So. 2d 594, 596 (¶6) (Miss. Ct. App. 2007). It appears that the chancellor found it disturbing that the property had lost a considerable amount of its value and he attempted to obtain an explanation to assist in the determination of the property’s fair market value. The chancellor addressed this issue during the proceedings with Chad as follows:

Chancellor: Property values are about the same now as they were three or four years ago?

Chad: Yes, sir.

* * * *

Chancellor: Have you taken away a lot of the improvements to the property in the past few years?

Chad: Taken away? What do you mean?

Chancellor: Are they gone from what they were from, say, 2009 until 2014? Have a bunch of the improvements been gone?

Chad: No, I haven’t.

Chancellor: Are they deteriorated very much, or have you kept them up pretty well?

Chad: Yes, sir, I have.

¶11. There was no evidence offered to support the reduction in value as both appraisals were conducted by the same entity. In addition, Chad testified that the property values were about the same as they were at the time of Catherine’s appraisal, that no improvements had been removed, and that the property had not deteriorated. “To the extent that the evidence on which [a] chancellor base[s] his opinion [is] less informative than it could have been, we lay that at the feet of the litigants and not the chancellor.” Williams v. Williams, 129 So. 3d 233, 241 (¶31) (Miss. Ct. App. 2013) (citation omitted). Chad failed to give a reasonable explanation for the diminishment in the value of the property from 2011 to 2014, even though property values generally had remained steady. The appraisals were the only evidence submitted to the chancellor to determine the value of the property. As stated, there was a considerable difference in the value arrived at by the two appraisals with no apparent explanation for the difference. The chancellor split the difference, as in his discretion he was permitted to do, to arrive at a reasonable value. McKnight, 951 So. 2d at 596 (¶7). After reviewing the record, we find nothing to suggest that the chancellor abused his discretion. This issue is without merit.

The chancellor actually did Chad a favor by giving him the opportunity to explain why his value of the property had decreased as much as he claimed in the period between the two appraisals. As you can see, Chad didn’t do much to help his cause. By the way, MRE 614 specifically allows the judge to examine any witnesses, and even to call witnesses herself. In this case, I think the appellate result would have been exactly the same whether or not the judge asked any questions.

It’s ingrained in our law that the chancellor may average values when presented with competing valuations. If you want to have a basis to challenge averaging, you have to put some evidence in the record as to why your client’s valuation is the more credible. For instance, had Chad called one or both of the appraisers to testify, that may have produced a different result. In the absence of that testimony, he may perhaps have been able to explain some deterioration of the property or some other factor affecting value negatively. Absence of that kind of proof left a vacuum which the chancellor filled with an average. And it deprived Chad of much to argue on appeal.

 

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