There are many different methods of valuing property. One of the more common methods, and one easily understood, is the fair market approach. Under this method, an item is valued by comparing it to similar items sold in the market place, whether it be a home, business or automobile, for example. Other valuation methods look at the income an item generates over time (income valuation), while still others consider the sum of the parts of the property taken together (asset valuation). Which valuation method is most appropriate in a Florida divorce proceeding? The answer, as you could imagine, is “it depends.”
The rule in Florida is that a trial court’s valuation of property must be supported by competent, substantial evidence. Garcia v. Garcia, 25 So.3d 687 (Fla. 4th DCA 2010), citing Mullen v. Mullen, 825 So.2d 1078, 1079 (Fla. 4th DCA 2002); Cummings v. Cummings, 719 So.2d 948, 950 (Fla. 4th DCA 1998). The trial court has broad discretion in deciding which valuation to apply during a divorce, especially when valuing a business. The Second District Court of Appeal explained it best in Erp v. Erp, 976 So.2d 1234, 1237 (Fla. 2nd DCA 2008):
The decisions that judges make when valuing businesses in the context of a divorce are fact-intensive and usually heavily dependent upon the opinions of well-trained experts. The question is not whether the trial court can employ one method or another in valuing a business, but is more appropriately phrased as whether an expert may be permitted to testify and render an opinion based upon a valuation method that the expert claims to be acceptable within his or her profession. If the expert is permitted to so testify, then the trial court, as finder-of-fact, should have considerable discretion in deciding what extent it accepts or rejects the expert testimony.
The court’s reasoning in Erp should be considered when parties to a divorce are fighting over which valuation methodology should apply. As the court explains, the issue is not which method should apply, but instead which expert’s opinion is more credible as to the appropriate valuation method used within his or her profession. Erp at 1237. If the expert is permitted to testify, then the trial court has “considerable discretion” in deciding whether to accept or reject the valuation expert’s opinion. Id.
The court’s discretion in valuation methodologies has its limits. In Solomon v. Solomon, 861 So.2d 1218 (Fla. 2d DCA 2003), the Second District Court of Appeal reversed a trial court that had “split the difference between competing valuations” of the marital home. See also, Vollmer v. Vollmer, 33 So.3d 67 (Fla. 2d DCA 2010). Likewise, in Augoshe v. Lehman, 962 So.3d 398, 403 (Fla. 2d DCA 2007), the Second District found that a valuation was improper where the court used a midpoint valuation of a motel acquired during the marriage. In Augoshe, the court held that the midpoint valuation was improper as it was not based on competent, substantial evidence. Similarly, in Vollmer, the appellate court found that the trial court abused its discretion when is applied an independent average for a husband’s income. Trial courts are not prohibited from using an averaging method in valuations, however, the trial court’s methodology must be supported by competent, substantial evidence with appropriate findings of fact. Vollmer, 33 So.3d at 69.