What to do with No Valuation at All?

August 10, 2019 § Leave a comment

James and Shann Martin consented to a divorce on the ground of irreconcilable differences, and left custody and equitable distribution to the judge for adjudication. Following a hearing the chancellor awarded James custody of their son and ownership of 35 acres of land that had been gifted to them by James’s parents. The judge also ordered James to pay Shann $20,000 for some improvements she had made to the property. Shann appealed.

In her appeal, Shann contended that the division of the marital estate was inequitably in James’s favor.

In Martin v. Martin, handed down August 6, 2019, the COA by Judge McCarty affirmed, and in its opinion turned its attention to a significant wrinkle in the record:

¶9. Shann contends that the distribution of assets was overwhelmingly in Mitch’s favor. Yet the record does not contain financial information to support this argument. Despite numerous requests from the chancery court, neither party provided the court with a single valuation of the assets at issue. There was no testimony of the market value of the real property. Appraisals were never conducted. Both parties failed to provide an amount of the tax refunds, the amount of money which was invested into the marital home, or by whom the money was invested. Indeed, the chancery court even noted in the divorce decree that “the Court [was] perplexed at the lack of evidence concerning property values.”

¶10. It is incumbent upon the parties, not the chancery court, to prepare the evidence needed to clearly make a valuation judgment. Stribling [v. Stribling], 906 So. 2d [863] at 870 (¶25). “Where a party fails to provide accurate information, or cooperate in the valuation of assets, the [chancery court] is entitled to proceed on the best information available.” Id.; see also Messer v. Messer, 850 So. 2d 161, 170 (¶43) (Miss. Ct. App. 2003) (“This Court has held that when a chancellor makes a valuation judgment based on proof that is less than ideal, it will be upheld as long as there is some evidence to support his conclusion.”). “To the extent that further evidence would have aided the chancellor in these decisions, the fault lies with the parties and not the chancellor.” Ward v. Ward, 825 So. 2d 713, 719 (¶21) (Miss. Ct. App. 2002).

¶11. Where, as here, a chancery court “appears to have fully explored the available proof and arrived at the best conclusions that [they] could . . . we can discover no abuse of discretion in those efforts that would require us to reverse [their] valuation determinations.” Dunaway v. Dunaway, 749 So. 2d 1112, 1121 (¶28) (Miss. Ct. App. 1999). The chancery court used the information provided by the parties to conduct a Ferguson analysis. “To the extent that the evidence on which the [chancery court] based [its] opinion was less informative than it could have been, we lay that at the feet of the litigants and not the [chancery court].” Id.

Bravo. The chancellor said that she was “perplexed” the lack of valuation evidence. That’s a good word. Amen.

In this district we do not allow the parties to obtain a trial date until they have presented the court with a consolidated asset list showing every asset with each party’s opinion of values and whether or not each asset is marital. If a party delays unreasonably in providing the information the court sets a deadline after which that party may not present proof of values at trial, and the other party’s values are accepted.

The Valuation Bugaboo — Again

October 13, 2014 § 2 Comments

It’s a never-ceasing source of wonderment to me how some lawyers devote so little attention at trial to valuation of assets when that proof is crucial to the outcome of the equitable distribution.

The latest object lesson on point is in the COA’s decision in Ilsley v. Ilsley, decided October 7, 2014. In that case, Susan and Timothy were in the throes of a divorce. Mediation had failed, and the two unhappy spouses appeared at trial as the only two witnesses.

The main equitable distribution battle ground was over an ING account with 21,225 vested (and some additional unvested) shares that Timothy had as part of his employment compensation with the Isle of Capri Casino. The COA opinion says that the “primary testimony and evidence presented at trial regarding the value per share” was Timothy’s testimony that it was worth $7.06 per share. A few months later, in his proposed findings of fact and conclusions of law, Timothy stated the share value as $5.30.

Before we go any further, take a minute to absorb what I just laid out: the evidence that the court had to rely on came from one of the parties. No expert, no agreed statement from a stock brokerage or the plan administrator, nothing other than the testimony of one of the parties.

Now, I am not taking the lawyers in the trial to task. It may be that the figures thrown out were what was developed in discovery and no further effort was needed. The end result though, is that the two figures injected into the record were the ones upon which the judge relied.

The chancellor concluded from the proof that the value of the vested shares in the ING account was $143,089, and awarded Susan $75,000, to be paid by Timothy as lump-sum alimony. The judge did not explain the value of the shares he applied to arrive at those figures, or the total number of shares he found. Susan appealed.

Judge Roberts, for the majority of the COA, said this:

¶10. Susan first argues that the chancery court erred in valuing and classifying stocks Timothy received as part of his compensation package from Isle of Capri. As part of his compensation package, Timothy was granted shares of stock each year that vest randomly over a three-year period and, once vested, are invested in an ING account. At trial, the parties stipulated that the number of vested shares in the ING account was 21,225 shares. In addition, there were 9,511 shares that granted after the date of the temporary order, but these shares had not yet vested. The chancery court found that these shares were marital, but awarded them to Timothy, as the shares had not yet vested. Timothy testified at trial that the value per share was approximately $7.06. This was the primary testimony and evidence presented at trial regarding the value per share. In his proposed findings of fact and conclusions of law, Timothy offered the value per share of $5.30. In its corrected final judgment of divorce, the chancery court found the total value of the ING account to be $193,497, and the value of the vested shares to be $143,089. The chancery court did not include in its judgment what the total number of shares or the price per share was in determing [sic] the total values.

¶11. As explained above, the two pieces of evidence presented to the chancery court as to the price per share were $7.06 as testified to at trial, and $5.30 as contained in Timothy’s proposed findings of fact and conclusions of law submitted several months after trial. “Where parties provide inadequate proof of an asset’s value, a chancellor’s valuation with ‘some evidentiary support’ will be upheld.” Dunn v. Dunn, 911 So. 2d 591, 597 (¶17) (Miss. Ct. App. 2005) (quoting Dunaway v. Dunaway, 749 So. 2d 1112, 1121 (¶28) (Miss. Ct. App. 1999)). In Dunaway, we held:

To the extent that the evidence on which the chancellor based his opinion was less informative than it could have been, we lay that at the feet of the litigants and not the chancellor. The chancellor appears to have fully explored the available proof and arrived at the best conclusions that he could, and we can discover no abuse of discretion in those efforts that would require us to reverse his valuation determinations.

Dunaway, 749 So. 2d at 1121 (¶28). Without having additional evidence provided by the parties, the chancery court was in the position to select a value for the shares and determined the total values for distribution. Additionally, the chancery court found that each party “will be entitled each to one-half of those [vested] shares.” Thus, the actual value per share fluctuates based upon the market, so the total value of the shares would vary based upon the market price.

¶12. We find that the chancery court did not abuse its discretion.

In other words, if you want a shot at overcoming a bad trial result, you’d better make it your business to make an adequate record at trial. Susan in this case in essence left the judge no choice but to rely on the figures offered by Timothy, and she ineffectively argued that it cost her, because she offered no proof to the contrary.

Proof of the Valuation Date

February 26, 2014 § 1 Comment

I’ve whined here more times than I can count about how the record is almost always bereft of any testimony from either party in a divorce about what valuation date should be used by the court in assessing values. The date that the chancellor uses can take away or add thousands of dollars to your client’s slice of the marital pie, so it’s a subject that you should approach with some interest.

The valuation date (or demarcation date) is entirely within the discretion of the court, and if you do not put evidence in the record as to which date should be used and why, then you are leaving it strictly up to the chancellor to go with any reasonable date. One of several previous posts where I spelled this out is here.

If I were trying a case with valuations, I would always ask my client what valuation date should be used and why. And remember, that different assets can have different valuation dates. Why? Well, for one thing, it gives you something in the record to argue, as opposed to raising the argument in a vacuum on appeal with nothing in the record to support it. For another, it just might be all the chancellor needs to select the very date that your client designates. And, for yet another, if you don’t put that evidence under the judge’s nose, how in the world do you expect the judge to guess correctly what your client wants?

So how do you pick the best valuation date for your client? Look at how values are fluctuating, if they are, and pick the most advantageous date, then have your client explain to the court why and how that date will produce the most equitable result. If you want inspiration on how to do this, I suggest you study the various appeals where the court has upheld the chancellor’s arbitrary decision on valuation dating. How the chancellor picked a date is one indicator you can use. You can also draw inspiration from the after-the-fact arguments of counsel who left it up to the trial judge. The COA decision in McDevitt v. Smith, handed down November 26, 2013, is a recent example.

Family Values in a Divorce

January 13, 2014 § Leave a comment

The case of Gardner v. Gardner, decided by the COA back on September 24, 2013, is not a landmark case, by any means, but it highlights the point that I have made here often that the values of assets that you put into the record just might be the ones your client gets saddles with, for better or worse. Here’s what Judge Lee’s opinion said about it:

¶19. “[F]indings on valuation do not require expert testimony and may be accomplished by adopting the values cited in the parties’ [Uniform Chancery Court Rule] 8.05 financial disclosures, in the testimony, or in other evidence.” Horn v. Horn, 909 So. 2d 1151, 1165 (¶49) (Miss. Ct. App. 2005) (citations omitted). The chancellor did the best he could with the evidence presented to him, and we decline to find error in his conclusions.

A couple of thoughts:

  • It often happens that both parties present the court with outlandish values. He values everything he wants her to have at phenomenally high values, and values the items he is to get at pitifully small values. She does likewise. That leaves the court with the alternatives: (a) to find that all the values have no credibility, and to order valuation by an expert; or (b) to average the values, or pick and choose among them to arrive at an adjudication of values; or (c) to order everything to be sold and the proceeds divided according to the formula for equitable division.
  • If your client contests some of the other party’s values, be sure to have him or her testify why. For instance, “I disagree that the dresser in the bedroom is worth $3,000 because we bought it at a yard sale for only $50 nearly 35 years ago, and it has a drawer missing, the mirror is broken, and my husband spilled a bottle of brandy on it, causing the varnish to be scarred and bubbly on the top.”
  • In Gardner, the wife was unhappy with the low value that the chancellor placed on husband’s tools and implements. Those kinds of items may actually merit valuation by someone with some pertinent experience, such as a credible mechanic, or the like. I once represented a man in the car painting business who had rescued some clogged painting nozzles from work that were discarded by his boss because it was cheaper to throw them away than to clean them. He took them home, painstakingly cleaned them, and used them for his hobby and side work. His wife valued the nozzles at $300-600 apiece. My client valued them at $25 each. The chancellor elected the wife’s value, and we had nothing in the record other than the parties’ testimony on which to base a contrary result. Ouch. Mrs. Gardner had a similarly unhappy outcome for the same reason.
  • Consider using discovery, and RFA’s in particular, to establish values.

As I have said here before, when you save or make your clients money, they love you. When you cost them money, they hate you. A little attention to values can go a long way on the positive side.

The Valuation Date as a Moving Target

January 6, 2014 § 3 Comments

The valuation date for equitable distribution is important to establish, as we have discussed before, here and here, among others. Asset values can fluctuate, significantly affecting the landscape of equitable division.

We’ve also discussed the MSSC holding that the date of the temporary judgement does not necessarily impose a demarcation date for valuation. That date is left to the sound discretion of the chancellor based on the evidence in the record.

The two principles arose together in the COA case of Stout v. Stout, decided December 10, 2013. In that case, Henry and Tracey Stout were before the chancellor on a consent, leaving equitable distribution for the judge’s adjudication. A temporary order had been entered in 2009, and the divorce trial was not held until 2012. In 2009, the marital home’s value was around $30,000 more than its value at the time of the final hearing. The chancellor elected to use the 2012 value, which caused Tracey to receive a smaller share of assets, resulting in an award of alimony.  

Henry appealed, complaining that it was error for the chancellor to use the trial-date value as opposed to the temporary-order-date value. He also argued that it was error for the chancellor to use different valuation dates for different assets. Judge Roberts wrote for the majority:

¶15. First, Henry claims that the chancellor improperly valued the marital home at its 2012 value as opposed to its value in 2009 when the temporary order was entered. He claims that due to the incorrect valuation, Tracey received a lower value of assets making it more likely that alimony would be necessary. Two appraisals were done on the home: the 2009 appraisal valued the home at $132,000; the 2012 appraisal valued the home at $105,000. The chancellor used the latter value when assessing the home’s value to Tracey. Henry admits that the chancellor had the discretion to set the dates for valuation of assets, and he cites to no other authority for his proposition that the chancellor is required to use the same date for valuation of all property. In using the 2012 value, the chancellor specifically noted that the house had significantly depreciated, that Tracey had been responsible for the mortgage payments since the separation, and that Henry had abandoned the house. The supreme court has stated that “the chancellor enjoys broad discretion to value property as of any date that, in the chancellor’s view, equity and justice may require.” In re Dissolution of Marriage of Wood, 35 So. 3d 507, 516 (¶20) (Miss. 2010). We can find no case law that a chancellor must use the same date when valuing all the property. Therefore, this issue is without merit.

A few observations:

  • As important as the valuation date is in an equitable distribution case, I reiterate that I seldom hear any proof as to what date a party wants me to impose, and why. It can make all the difference in the world to your client, yet, if you do not put anything in the record to support a finding favorable to your client, you are leaving it up to the judge’s unfettered discretion. I am not saying that is what happened in this case; we don’t have enough information to tell.
  • It was enlightening to read that the COA could find no authority for one, global valuation date. I have never been able to divine an answer from the case law on the point either. In most cases, I am presented with valuation dates all over the ballpark. An example might be: a real property appraisal of the marital residence from 2012; IRA statements from June, 2013; personal property appraisal 3 months before the November, 2013 trial; securities account statements dated December, 2012. In a case like that, it seems that the judge has no choice but to use the best information available for the dates provided, unless the judge orders the lawyers and parties to go back to the drawing board, so to speak, to gather some more current info as of a given date.     
  • The most grateful clients are the ones whom you save lots of money. The clients who come to hate you are the ones you cost a lot of money. Valuation of the assets, and making the case for a valuation date favorable to your client’s best interests, are sure-fire ways to save — or make — a lot of money.

Averaging Valuations

November 18, 2013 § 1 Comment

I’ve whined here before about inadequate proof of values in equitable didtsribution cases and the burden it places on the trial judge. I won’t repeat my plaints here.

The latest case where a chancellor had to make a decision with far-less-than-precise proof of values is Williams v. Williams, decided by the COA on October 5, 2013.

Phillip and Gail Williams were before the court in a divorce where the main matter in dispute was equitable distribution. Neither party produced an appraisal of a residence and real property in Alabama. Instead …

  • Phillip introduced a document styled “An Acknowledgment of Lease Purchase Agreement” by which Phillip purported to sell the property to a purchaser for installment payments of $325 a month until he could “obtain a loan to pay off the balance of $40,000 … less the $325 a month without interest …” The document was filed among the land records in Alabama. In his testimony, Phillip stated that the purchaser would, indeed, be paying more than $50,000 for the property.
  • Gail introduced a tax receipt showing that the property was valued for tax purposes at $61,100, with $43,900 attributed to the house, and the remainder to the underlying property.

Also included in the adjudication were the parties’ householdd goods, yard equipment, and tools, the values of which were in dispute between the parties, and for which there was no appraisal. Each party accused the other of undervaluing the items that he or she would keep, while overvaluing the items that the other would receive.

The chancellor averaged Phillip’s claimed $40,000 value with Gail’s tax receipt value of $61,110, and adjudged the value of the Alabama property at $50,550. She also averaged the parties’ valuations of the personalty.

Phillip appealed, complaining that the chancellor was in error in averaging the values.

Judge Fair, for the COA, addressed the issue this way:

¶31. In McKnight v. McKnight, 951 So. 2d 594 (Miss. App. Ct. 2007), we held that the averaging of proposed appraisals was allowed in valuation of marital realty. Even more recently we held chancellors are required only to do the best they can with what is introduced into evidence before them:

[T]he chancellor cannot be blamed for the failure of the parties to present evidence of valuation. Faced with similar circumstances, this Court held as follows in Dunaway v. Dunaway, 749 So. 2d 1112, 1121 (¶28) (Miss. Ct. App. 1999):

[T]he chancellor, faced with proof from both parties that was something less than ideal, made valuation judgments that find some evidentiary support in the record. To the extent that the evidence on which the chancellor based his opinion was less informative than it could have been, we lay that at the feet of the litigants and not the chancellor. The chancellor appears to have fully explored the available proof and arrived at the best conclusions that he could, and we can discover no abuse of discretion in those efforts that would require us to reverse his valuation determinations.

It was not the chancellor’s duty to obtain appraisals of the marital property. Willie cannot now complain that the chancellor’s valuations are unfair when no reliable evidence of the value of the property was presented at trial. This issue is without merit. Common v. Common, 42 So. 3d 59, 63 (¶¶12-13) (Miss. Ct. App. 2010).

¶32. We find the chancellor’s averaging of valuations provided on Rule 8.05 forms submitted in the record and discussed on the record an acceptable course of action and within her discretion.

¶33. Overall, we find Phillip’s objections to the characterization, valuation, and division of marital property to be based on the evidence and within her discretion under Hemsley, Ferguson, and their progeny.

I get it that in some cases the cost of obtaining appraisals can seem disproportionate to the advantage to be gained. And there are some cases where one side, if not both, would prefer for the proof to be fuzzy in hopes that the chancellor will fall their particular way. 

When you leave it up to the trial judge to resolve inconclusive or incomplete evidence, you get what you get. As long as the chancellor “explored the available proof and arrived at the best conclusions that he could,” and did not otherwise abused discretion, you will be stuck with the results.

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