Raymond v. RaymondRaymond v. Raymond
Jeffrey K. Lucas, for appellant.
APPEAL from the Franklin County Court of Common Pleas, Division of Domestic Relations.
FRENCH, J.
{¶1} Defendant-appellant, John Raymond (“John“), appeals the judgment of the Franklin County Court of Common Pleas, Division of Domestic Relations, in this divorce action filed by plaintiff-appellee, Elizabeth Raymond (“Elizabeth“). For the following reasons, we reverse and remand for further proceedings.
{¶2} John and Elizabeth were married in 1973 and, as of the time of trial, one child born as issue of the marriage remained a minor. The parties stipulated that they are incompatible and lived separate and apart without cohabitation for more than 12 months. On that basis, the trial court granted each party a divorce. The parties agreed to, and the trial court adopted, a shared parenting plan that resolved all issues of parental rights and responsibilities. The parties also stipulated that neither sought spousal support. The trial court established a de facto termination date of January 7, 1999, the date Elizabeth permanently vacated the marital residence and retained divorce counsel.
{¶3} This case proceeded to trial, beginning February 28, 2011. The primary marital asset, and the major source of contention between the parties, was a home cleaning business, Mini-Maids Services of Columbus (the “business“), which the parties purchased in or around 1978. John, the only witness to testify at trial, attempted to offer his lay opinion regarding the value of the business, pursuant to
II. ASSIGNMENTS OF ERROR
{¶5} John filed a timely notice of appeal, and he now raises the following assignments of error:
- The trial court committed error when it denied [John‘s] testimony and exhibits as to the value of [Elizabeth‘s] business based upon his own personal knowledge and pursuant to
Evid. R. 701 [.] - The Trial Court committed error when it failed to properly value a material asset of the parties resulting in an inequitable distribution or distributive award pursuant [to] and in violation of [
R.C.] 3105.171 [.] - The trial court committed error in its determination of the award of attorney fees in violation of the Fourteenth Amendment of the United States Constitution.
- The trial court committed error in denying market quotations and tabulations contained in Exhibits 9 and Exhibits 16, into evidence in violation of
Evid. R. 803 .
A. FIRST ASSIGNMENT OF ERROR
{¶6} By his first assignment of error, John argues that the trial court erred by excluding his lay opinion testimony regarding the value of the business. John maintains that his testimony is admissible under
{¶7} The requirement that lay opinion testimony is rationally based on the witness’ perception reflects a recognition of the limitation, embodied in
{¶8} Generally, before a witness may testify as to his opinion of the value of property, the witness must qualify as an expert. Tokles & Son, Inc. v. Midwestern Indemn. Co. (1992), 65 Ohio St.3d 621, 625, citing State Auto Mut. Ins. Co. v. Chrysler Corp. (1973), 36 Ohio St.2d 151. The Supreme Court of Ohio, however, has recognized that, because “[s]ome items are complex and their value is intermingled with fact and opinion * * *, out of necessity, nonexperts are often permitted to enlighten the jury with their own opinions concerning the value of these items.” Tokles at 625. Non-expert opinion testimony as to value must comply with
{¶9} Before offering a lay opinion about value, ” ‘[t]he witness must show that he is familiar with the property itself and that he has current sufficient knowledge of the value of the item by, for example, demonstrating a firsthand knowledge of the characteristics of the property, its actual and potential uses and its condition or by showing other meaningful experience in dealing with the item.’ ” Id. at ¶18, quoting Tokles at 627. For example, a corporate officer and certified public accountant was permitted to estimate the cost of the corporation‘s business system and what another company would save if it were to obtain such a system where his testimony was
{¶10} In Ohio, an owner of real or personal property may generally testify concerning the property‘s value without being qualified as an expert “because it is presumed that owners are generally quite familiar with their property and its value.” Tokles at 625; Smith v. Padgett (1987), 32 Ohio St.3d 344, 347. Some Ohio courts have extended the owner-opinion rule to hold that a business owner is qualified to offer lay opinion regarding the value of the business. See Jacobs v. Jacobs (June 10, 1982), 8th Dist. No. 44104 (holding that an owner‘s opinion testimony, while not conclusive, constitutes some evidence of value); Kelly v. Kelly, 2d Dist. No. 19263, 2003-Ohio-612, ¶37. “[O]wners of property have been permitted to testify not merely because they are owners, but rather because, due to that ownership, they are presumed to have special knowledge of the value of their own property.” Tokles at 626. Nevertheless, while ownership “may involve an intimate knowledge of the nature, quality, cost, and condition of * * * property,” the Supreme Court of Ohio also recognized that, in some cases, “ownership of property may * * * constitute very little, if any, qualification to form an opinion as to the value of the property.” Id.
* * * [M]ost courts have permitted the owner or officer of a business to testify to the value or projected profits of the business, without the necessity of qualifying the witness as an accountant, appraiser, or similar expert. * * * Such opinion testimony is admitted not because of experience, training or specialized knowledge within the realm of an expert, but because of the particularized knowledge that the witness has by virtue of his or her position in the business. * * *
Federal courts have held that an owner‘s lay testimony as to the value of a business must be limited to those opinions derived from the witness’ personal knowledge of the business and simple calculations of lost profits by comparison with the business’ historical results. See In re MarketXT Holdings Corp. (Jan. 7, 2011), Bankr. S.D.N.Y. No. 04-12078(ALG). There, the court held that testimony based on a model that incorporated the types of assumptions used in an expert report went beyond the witness’ personal knowledge and his experience as president of the business and entered a realm of calculation beyond the pale of lay opinion. “A party must lay an adequate foundation and show that the officer or owner ‘had sufficient personal knowledge of their respective businesses and of the factors on which they relied to estimate profits.’ ” Nationwide Transport Fin. v. Cass Information Sys., Inc. (Mar. 6, 2006), D.Nev. No. 2:04-CV-08-BES-LRL, quoting LifeWise Master Funding v. Telebank (C.A.10, 2004), 374 F.3d 917, 929. The owner “has to have personal knowledge of the information underlying the calculations and how that information is combined to achieve the bottom line.” Nationwide Transport Fin.
{¶13} At least some Ohio appellate courts have similarly required some foundation beyond mere ownership to permit a property owner to testify about the value of his property. In Francis v. Wilson (Jan. 25, 1999), 4th Dist. No. 97CA40, the court held that a property owner‘s mere status as an owner was an insufficient basis for admitting lay opinion testimony, but her special knowledge gained, by virtue of her ownership, formed a sufficient basis for the trial court to exercise its discretion to admit the testimony. “[T]he ultimate question is whether the nature of the person‘s ownership * * * is of sufficient character to presume a familiarity with the nature, quality, cost, and condition of the property that allows a credible opinion on value.” State v. Heap, 1st
{¶14} In light of these legal authorities, we now turn to the evidence regarding John‘s ownership and knowledge of the business, as well as his proffered testimony regarding its value. John generally testified that he and Elizabeth purchased the business and that he had personal knowledge of the business operations. Elizabeth has not contested John‘s ownership interest in the business or the marital nature of the business, but she objected to John‘s opinion testimony. The trial court did not abuse its discretion by sustaining Elizabeth‘s objection and excluding the proffered evidence where John did not show knowledge or experience dealing with the business sufficient to presume a particular means of framing an intelligent and correct opinion as to the business’ value. Although John qualified as an owner, his testimony revealed a lack of first-hand experience sufficient to satisfy the requirement under
{¶15} John‘s testimony regarding his knowledge of the business included only vague recollections of how the business was structured. He stated, “[t]here was really no business entity at [the beginning]. It was later [Elizabeth] doing business as DBA.” (Tr. 98.) John‘s testimony regarding his involvement in the business was similarly
{¶16} John‘s testimony of the business’ gross revenue for 1997 and 1998 was based solely on Elizabeth‘s federal tax returns, at least one of which was a joint return. He did not know whether the business owed sales tax or owed money to the Bureau of Workers’ Compensation in January 1999. He stated that Elizabeth “kept track of all of that and she handled most of that.” (Tr. 166.) In response to questions posed by the trial court, John testified that he had never prepared a business valuation, never maintained the books for the business, never maintained profit and loss statements for the business, and had never completed a corporate or business income tax return. John‘s testimony revealed limited personal knowledge, without any specific recollections or supporting documentation, of the business operations and finances.
{¶17} As a preface to his proffered opinion of the business’ value, John testified that he read a book from the Professional Association of Public Accountants that explained how a business would be evaluated for resale. John testified and/or proffered testimony regarding three methods he used to value the business. First, he looked at two websites to obtain an “industry multiplier” and, from those websites, determined that
{¶18} John argues that his testimony and the evidence supporting it were admissible because it consisted of mere mathematical calculations. To that end, he cites United States v. Madison (C.A.6, 2007), 226 Fed.Appx. 535, in which the court concluded that a financial analyst properly testified as a lay witness where he merely examined records of transactions and stated the origin and the destination of funds. The witness’ conclusion—that the defendant would not have been able to make the
{¶19} In contrast to the testimony at issue in these cases, however, John‘s opinion testimony involved more than simple, mathematical calculations. Indeed, John‘s opinion is based on comparison of allegedly-comparable companies in different markets, the creation of multipliers based on assumptions regarding those other companies, and the application of those multipliers to the average revenue of the business. While the actual mathematics computed by John may be within the capacity of a reasonable lay person, the underlying assumptions, the validity of those assumptions, and the import of John‘s calculations, are not. Contrary to John‘s suggestion, an opinion based on these determinations goes beyond a simple mathematical calculation within the capacity of a reasonable lay person.
{¶20} A property owner may testify as to the underlying factors upon which he or she bases an opinion as to the value of property. Columbus v. Papageorgiou (Sept. 3, 1987), 10th Dist. No. 86AP-1157. Only an expert witness, however, may testify concerning the value of property when the witness’ opinion is based, in whole or in part, on hearsay. Proctor v. Bader, 5th Dist. No. 03 CA 51, 2004-Ohio-4435, ¶30-31, citing Weir v. Miller (Apr. 13, 1983), 12th Dist. No. 82-04-0044; Tippie v. Patnik, 11th Dist. No.
B. SECOND ASSIGNMENT OF ERROR
{¶21} By his second assignment of error, John maintains that the trial court erred by failing to properly value the business, a marital asset, and by, accordingly, issuing an inequitable distribution in violation of
{¶23} A trial court must generally assign and consider the values of marital assets in order to equitably divide those assets. See Hightower v. Hightower, 10th Dist. No. 02AP-37, 2002-Ohio-5488, ¶22. A court cannot satisfy its duty without probative evidence of the value of marital assets. Kelly at ¶36.
{¶24} Nevertheless, a party‘s failure to put on any evidence of value does not permit the court to assign an unknown as the value of a marital asset. Richardson v. Richardson, 10th Dist. No. 01AP-1236, 2002-Ohio-4390, ¶45, citing Willis v. Willis (1984), 19 Ohio App.3d 45, 48. Where the trial court is not presented with evidence upon which to value marital property, the court should instruct the parties to provide that evidence. See Beagle at ¶41, 50. Furthermore, in Kelly, at ¶39, the court noted that “the [trial] court could perform its statutory charge to divide marital assets equally only by appointing a qualified, independent appraiser to provide the court a report on which it could rely. The appraiser‘s fee may be taxed as costs to the parties.” There, the
{¶25} There is no dispute in this case that the business constitutes a marital asset or that the trial court declined to assign a value to the business. Because the trial court did not assign a value to the business or consider that asset in effecting its property division and distribution, we conclude that the trial court abused its discretion. For this reason, we sustain John‘s second assignment of error and remand this matter for the trial court to value the business and issue a new distributive order, taking into account that value, consistent with
C. THIRD ASSIGNMENT OF ERROR
{¶26} In his third assignment of error, John asserts that the trial court erred by not awarding him attorney fees, pursuant to
D. FOURTH ASSIGNMENT OF ERROR
{¶27} In his final assignment of error, John argues that the trial court erred by excluding two exhibits he created in part and relied on in formulating his opinion as to the value of the business. Exhibit 9 consists of nine internet printouts, each of which purports to list a cleaning company for sale and includes information like the asking price, the company‘s annual revenue, and the year the company was established. A tenth page is John‘s compilation of the information contained on the other pages and his computation of the percentage of annual revenue represented by each company‘s asking price. Exhibit 16 consists of pages purportedly copied from BIZCOMPS 2008 Eastern States Study by Jack R. Sanders, CBA, CBI (the “BIZCOMPS book“), which lists statistics regarding completed sales of businesses. The first page of the exhibit sets forth John‘s compilation of statistics from 19 sold cleaning companies, as listed in the BIZCOMPS book, and John‘s computation of a sales-price-to-annual-revenue ratio for each of the 16 companies. John contends that the exhibits are admissible under
{¶29} The admission of evidence pursuant to the hearsay exceptions in
{¶30} Here, even assuming that the listings John printed from various websites and the BIZCOMPS book qualify as exceptions under
IV. CONCLUSION
{¶31} In conclusion, we overrule John‘s first and fourth assignments of error, sustain John‘s second assignment of error, and render John‘s third assignment of error moot. For the reasons stated in this decision, we reverse the judgment of the Franklin County Court of Common Pleas, Division of Domestic Relations, and remand this matter to that court for further proceedings consistent with this decision and the law.
Judgment reversed; cause remanded with instructions.
TYACK and CONNOR, JJ., concur.