March 13, 2013
A growing number of states require, by statute or case law, that the court set the date for valuing marital property in advance of the actual hearing. In Virginia, for example, all marital property must be valued on the date of the evidentiary hearing. But "[u]pon motion of either party made no less than 21 days before the evidentiary hearing the court may, for good cause shown, in order to attain the ends of justice, order that a different valuation date be used." Va. Code Ann. § 20-107.3. In New York, "[a]s soon as practicable after a matrimonial action has been commenced, the court shall set the date or dates the parties shall use for the valuation of each asset." N.Y. Dom. Rel. Law § 236(B)(4)(b). Setting the date of valuation in advance allows all of the experts to value property as of the same date and therefore removes one important source of variance in parties' valuations.
But what happens if there is a material change in circumstances after the court has entered an interlocutory order setting the date of valuation? In Caveney v. Caveney, 81 Mass. App. Ct. 102, 960 N.E.2d 331 (2012), a discovery master initially set the date of valuation as June 30, 2008. In late 2008, of course, the national economy entered a sharp and very severe recession. The recession caused a significant decrease in the value of many marital assets. The wife therefore filed a motion, supported by an affidavit from her financial expert, asking the court to value the assets as of December 31, 2008.
The trial court granted the motion, and the Massachusetts Appeals Court affirmed. "Based on the changes in the economic climate, the judge indicated that it was reasonable and proper for the wife to utilize a valuation date of December 31, 2008." Id. at 107, 960 N.E.2d at 336.
The discovery master's order setting the date of valuation in Caveney did expressly allow either party to modify the order by filing a motion. But the result would probably not have been materially different if that express modification provision had not been present. Interlocutory orders granted by a trial court are generally not final and are therefore subject to modification in the discretion of the court until a final order has been entered in the case. For example, in Virginia, the trial court has full discretion to modify any order it makes until 21 days after entry of a final order resolving all contested issues in the case. Va. Sup. Ct. R. 1:1. In states with Rules of Civil Procedure based upon the federal model, "any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties . . . may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities." Fed. R. Civ. P. 54(b). Since a pretrial order setting the date of valuation will never resolve all contested issues in the case, the trial court has discretion to modify such an order after it has been made.
An order setting the date of valuation should not, of course, be changed lightly. The purpose of such an order is to manage the case in an orderly fashion by ensuring that all expert valuations use the same date. If the order can easily be modified, many of its advantages are lost.
Nevertheless, situations do exist in which a material change in circumstances requires modification of an order setting the date of valuation. The fact pattern in Caveney, where a recession of historically severe magnitude occurred after the established date of valuation but before the date of trial, is a good example. One could also imagine situations involving a change to the value of a single asset. For instance, a business might go bankrupt, or it might receive an offer to purchase in a larger amount than either spouse previously believed the business was worth. When significant new facts emerge, it is important that the court retain the option to modify an order setting the date of valuation.
This sort of modification should not be needed often, but there is no guarantee that market conditions will remain unchanged between the time when the date of valuation is set and the time when the case is actually tried.