§6.3 Valuation Issues

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§ 6.3 VALUATION ISSUES

§ 6.3-1 Generally

Ultimately, the decision regarding the value of property is the judge's alone. The judge can accept the wife's value, the husband's value, or an expert's value, or come up with something in between. "There is no rule of law that requires the valuation of property to be mathematically certain." In re Marriage of von Ofenheim, 40 Or App 865, 870-71, 596 P2d 1007, rev den, 287 Or 477 (1979). See In re Marriage of Langan, 89 Or App 320, 324, 748 P2d 1035, rev den, 305 Or 433 (1988) (the trial court made no express finding of value but apparently used a value that was somewhere between extremes presented by the parties); In re Marriage of Pagano, 147 Or App 357, 935 P2d 1246 (1997) (the trial court assigned a value of roughly half of what the wife claimed an asset was worth).

The court is not required to "show its math" in valuing an asset. In re Marriage of Stevenson, 168 Or App 673, 680, 7 P3d 648 (2000). In rejecting such a notion, the Court of Appeals has said:

However, we disagree with husband's understanding that the trial court was required to "show its math" in valuing husband's interest in wife's enhanced earnings on the record in this case. The court faced a dilemma that regularly surfaces in dissolution cases: it was convinced that an asset did exist and should be allocated in a way that is just and equitable, but the court was not provided with adequate information to assign a specific value to the asset. There is ample authority for what was done here, namely, to make the best possible estimate of the value of husband's interest given the quality of the evidence.

Stevenson, 168 Or App at 680.

Nor is the court required to adopt the opinion of an expert that presents testimony regarding the value of an asset, or even to decide between the multiple experts offered at hearing. See, for example, In re Marriage of Gay, 250 Or App 31, 279 P3d 265 (2012), in which the court found neither expert credible. As with all conflicting evidence, the probative value of such evidence is solely for the trial court to determine. See Friends of Parrett Mountain v. Northwest Natural Gas Co. (In re Site Certificate for South Mist Pipeline Extension), 336 Or 93, 105, 79 P3d 869 (2003) ("the probative weight to be accorded to the testimony of expert witnesses is for the trier of fact to apportion"). The decision as to value remains within the discretion of the trial court. But see § 6.3-7 (stipulations on value).

§ 6.3-2 Valuation Date

Assets are typically valued as of the date of the dissolution. See In re Marriage of Stokes, 234 Or App 566, 576, 228 P3d 701 (2010) (the proper date for valuation of a marital asset is the date of dissolution); In re Marriage of Peterson, 141 Or App 446, 450, 918 P2d 858 (1996) (the trial court erred in not using the value of an asset at the date closest to the date of dissolution); In re Marriage of Olinger, 75 Or App 351, 357, 707 P2d 64, rev den, 300 Or 367 (1985) (in the absence of a long period of separation with mutual financial independence, property interests are to be valued as of the date of dissolution).

This valuation date may be altered through evidence, such as unequal contribution (In re Marriage of Taraghi & Spanke-Taraghi, 159 Or App 480, 493, 977 P2d 453 (1999); Stokes, 234 Or App at 576)), or simply as a way of fashioning a just and proper result (In re Marriage of Richardson, 307 Or 370, 377, 769 P2d 179 (1989)). See § 6.2-4 regarding the length of the parties' separation and the examples discussed therein.

PRACTICE TIP

The date of the actual valuation of any asset involving the stock market (i.e., investment accounts and some pension benefits) can be critical in a rapidly vacillating market. The lawyer should check the market often to stay on top of what may be a frequently changing value. The lawyer should also consider whether or not to include judgment-division wording suggesting division as of a certain date, "together with any investment gains and losses" until the date the division is actually completed.

In Peterson, 141 Or App at 449-50, the husband objected to the trial court's valuation of his medical practice, including accounts receivable that were higher at the time the practice was valued than the accounts were at trial. The court agreed that the correct figure to use was the accounts receivable balance due on the date of trial.

In In re Marriage of Lynch-Kirby & Kirby, 220 Or App 188, 185 P3d 494 (2008), the court enforced an alternate (nontrial) valuation date agreed on by the parties, noting that ORS 107.104 directs the court to enforce contracts between the parties.

§ 6.3-3 Valuation Methods

The court must determine the value of the assets to fashion a just and proper distribution of them. Unfortunately, appraising financial assets is an inexact science, often as much art as science. Reputable, knowledgeable appraisers, given the same set of facts, may provide a lawyer with different opinions of value and suggest different methods of valuation. Ultimately, though, the decision of value is left to the judge's discretion.

See § 6.3-1.

PRACTICE TIP

The lawyer should review chapter 7 (business valuation) for an in-depth discussion of various valuation methodologies, discounts, and issues relating to goodwill.

For valuation of real property, the property tax statutes and cases give some guidance on valuation. Real market value of all property, real and personal, means the minimum amount in cash that could reasonably be expected by an informed seller acting without compulsion from an informed buyer acting without compulsion, in an arm's-length transaction during the fiscal year. ORS 308.205(1).

"Real market value" is to be determined by the "methods and procedures" set forth by the Department of Revenue. ORS 308.205(2). For property tax purposes, OAR 150-308-0240 requires that three methods of valuation be considered, even if all three do not apply to a given property. These three methods are the methods also used by most appraisers:

(1) Sales comparison approach: Recent sales of similar assets are examined to set the value of the asset in question. OAR 150-308-0240(2)(c).

(2) Cost approach: Value is set by determining how much it would cost to either replace or acquire an identical asset. OAR 150-308-0240(2)(f).

(3) Income approach: An asset's value is set by determining the present value of the income that may be expected from it in the future. OAR 150-308-0240(2)(g).

The administrative rule applicable to property tax issues provides guidance to lawyers regarding not only what to look for in a good appraisal, but also what points of inquiry to raise during the cross-examination of the opposing party's expert witness. For example, the rule requires that all transactions used in the "sales comparison approach must be verified to ensure they reflect arms-length market transactions." OAR 150-308-0240(2)(c). Transactions involving atypical market conditions (e.g., "duress, death, foreclosures, interrelated corporations or persons, etc.") are not to be used in the sales comparison approach "unless market-based adjustments can be made for the non-typical market condition." OAR 150-308-0240(2)(c).

The tax department has rules for property that is "specifically designed, equipped, and used for a specific operation or use." OAR 150-308-0240(3). The rules may apply if the special property is part of the larger total operation or if the nature of the operation or use is specialized, but in any case, the improvement's usefulness is "designed without concern for marketability." OAR...

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