Florida Case Law: Does the Recession Warrant a Do-over?

Mistretta v. Mistretta, Fla. Dist. Ct. App., No. 1D09-2049 (per Benton) Decided February 18, 2010.
In the final judgment dissolving the parties’ marriage, entered on August 25, 2008, the trial court used October 31, 2007 as the date for determining the value of assets for purposes of equitable distribution. The trial court distributed one of the parties’ principal assets, a family business, to Appellee and ordered him to make a cash equalization payment to Appellant in an amount based largely on the valuation of the business on October 31, 2007. Appellee filed an amended motion for rehearing, alleging that an economic recession began in December of 2007 that caused the business to sustain a substantial loss in 2008 and that this “newly discovered evidence” warranted a new trial and reevaluation of the business. The trial court granted the amended motion, stating that to do otherwise might prove inequitable.
Did the trial court err in deciding to revisit the distribution of property it had ordered in a dissolution case, on the stated ground that a recessionary economy was totally unforeseen?
Yes. The fact that the future unfolds differently than business appraisers assume cannot be the basis for a new trial on the value of a business if trials on such issues are ever to yield reliably final adjudications. Reversed and remanded.
Projections of future revenues and cash flows are pertinent in assessing the value of a business. But, projections of future revenues, expenses and income necessarily depend, not only on known or knowable facts already in existence, but also on assumptions about the future that will not always, if ever, be entirely accurate. The dissent distinguished this case from the general rule applied by the majority in two respects. First, the economic downturn in this case could only have been determined after the fact and second, the recession is of historic proportions. Both of these factors, combined with the fact that the valuation involved a small family business, persuaded the dissent of the inequity of the original final judgment of dissolution.
This case is very timely. I am seeing the impact of the recession on divorce cases daily;  homes that won’t sell, unemployed spouses and credit problems are rampant in the new economy. I think this was a practical ruling seeking to avoid opening the door for other aggrieved litigants, claiming the meltdown materially affected their asset values. While it seems unfair to the business owner, I know he wouldn’t have sought a do-over if the business was sold a year later for materially more than the valuation. SNP


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Filed under Divorce court, marital property, Uncategorized

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