Family Law Case Review

Case: Patrick M. McGrath v. Linda S. McGrath

Case Summary by Mike Kohlhaas, Bingham McHale LLP

HELD: Trial court was reversed for its choice of valuation date for real estate, even though the valuation date selected by the court fell between the date the petition for dissolution was filed and the date of the final hearing. This case strongly suggests that, while a divorce court has discretion in selecting a valuation date for a marital asset, where the court has a choice between using a date of filing value and a date closer to the final hearing — and the value of the asset changed significantly during the pendency due solely to market fluctuation — then the more recent valuation date should be used.

FACTS AND PROCEDURAL HISTORY: Husband and Wife married in 1971. In 1994, the parties purchased real estate in Michigan City. In 2005, Wife filed a petition for dissolution of marriage. Several months later, the Michigan City real estate was appraised for $389,000. In late 2009, as the parties’ final hearing approached, the property was appraised again, this time for $229,000.

In April 2010, the parties’ final hearing was held. Both the 2005 and 2009 appraisals for the Michigan City property went into evidence. There was no evidence presented that the decline in value of the property was a result of any factors other than the general decline of the house market. Following the final hearing, the trial issued a decree that expressed an intention to divide the marital estate 50/50; however, the decree awarded the Michigan City property to Husband at its 2005 valuation. Following an unsuccessful motion to correct errors, Husband appealed.

The Court of Appeals noted the general axioms that the trial court has broad discretion in determining the date on which marital assets should be valued and, further, the trial court may select any date between the date the petition for dissolution is filed and the date of the final hearing. Nevertheless, the Court of Appeals concluded in this case that “the court abused its discretion by failing to consider the substantial change in value of the [Michigan City real estate] as expressed in the 2009 appraisal report to calculate the total marital assets and distribution of the marital property.” The trial court’s decree was reversed and remanded with instructions to enter a modified decree that implements the intended 50/50 division of the marital estate, but takes into account the decline in the value of the Michigan City real estate.

Judge Friedlander concurred with a separate opinion to stress the internal inconsistencies of the trial court’s decree: an intention to implement a 50/50 division of the marital estate; an expressed observation that the value of the Michigan City real estate had declined substantially; and, yet, the trial court awarded it to Husband at its date of filing value. “A trial court has the discretion to choose a valuation date from among a range of options, and it has the discretion to divide an estate evenly, or not . . . It may not, however, purport to achieve a current equal division by assigning a value to an asset that does not comport with current reality.”

To view the text of this opinion in its entirety, click here: Patrick M. McGrath v. Linda S. McGrath

Leave a Reply