The Journal of The DuPage County Bar Association

Back Issues > Vol. 24 (2011-12)

Client and Expert Testimony: When and How to Use Each to Provide Valuation Evidence in a Divorce Case
By Steven N. Peskind

Issues of valuation are present in virtually all divorce cases. The Illinois Marriage and Dissolution of Marriage Act[1] requires the trial judge to value all property before dividing it between the parties.[2] The parties must provide sufficient information to allow the court to do this.  There are three ways to establish value: by stipulation, by expert testimony, or by opinions of the owners. Stipulations are welcome by most trial judges. But if no stipulations are available, an expert may testify to value, or the owner may provide an opinion of the asset’s value.  In any event, a proper foundation for the evidence must be established. This article will first look at expert testimony for establishing property value and then will look to the use of lay witnesses, such as one's client, to establish property value.

Expert Testimony. There are no specific rules for expert testimony in a divorce case. All expert testimony is governed by the Illinois Rules of Evidence 701 through 705. Generally, expert testimony must be reliable and helpful to the court. Three questions must be answered before the testimony is admissible: (1) Is the expert qualified to render an opinion? (2) Is the subject matter appropriate for the opinion? (3) Did the expert properly analyze the facts of the case in rendering his or her opinion?

A witness may qualify as an expert on the basis of acquired knowledge, technical skill, experience, training or education.[3]  Expert testimony is not limited to scientific or technical areas, but includes any area where the expert has some specialized knowledge.[4]  For example, a knowledgeable farmer could be an expert on going rates per acre for local farm property.  Or, an auctioneer could provide an opinion of value for personal property based upon their experience auctioning similar property. If the opponent believes the expert lacks sufficient expertise or a firm foundation for their report, the court may permit a voir dire examination of the witness to challenge the propriety of the testimony.[5]

Most commonly in divorce cases, experts testify to the value of real estate, business interests, defined benefit plans, artwork, collections and other personal property. Illinois Rule of Evidence 703 allows an expert to base an opinion on inadmissible facts if experts ordinarily rely on those facts in formulating opinions.[6] These facts are not considered for the truth of the matter asserted; rather, they serve as the basis of the expert’s opinion. As a result, the expert’s testimony that relies on these out-of-court statements is not considered hearsay.

Illinois follows the principles set forth in Frye v. United States[7] to determine the propriety of novel methodologies used as part of the evaluative process.  Also known as the “general acceptance standard,” the expert must convince the court that their community of professionals generally accepts the methodology they chose in this particular instance. This burden only applies to novel theories. For example, if an evaluator relied on a new test to distinguish enterprise from personal goodwill, the expert must preliminarily establish that the valuation community generally accepts the test. But even if the testimony does not rely on novel methodologies, the court must determine if the analysis is reasonable and reliable in order for it to be relevant.[8]

To offer an expert’s opinion concerning value, the foundation for the testimony is largely the same regardless of the type of asset being valued, to wit: (1) Identify the mission: what are they valuing? (2) Have the expert identify the standard of value employed (fair market value in a divorce case, for example); (3) Qualify the expert by having them testify to the basis of their specialized knowledge (education, experience, training etc.); (4) Have them discuss the information  (underlying facts, observations, data, opinions, etc.) they considered in support of their opinion of value; (5) If novel methodologies were used, have them explain the process, including whether the particular methodology is generally accepted in their professional community; (6) Have them generally explain their methodology (walk through their evaluative process); and (7) Have the expert render their opinion regarding value.

 Testimony by owners. Illinois courts allow an owner to give skilled layperson opinion regarding the value of their home or certain personal property.[9]  As stated in the case of In re Marriage of Vucic, “…Property ownership usually indicates knowledge of the original price paid, taxes paid, improvements made and the current state of the property, such that the owner probably has a reasonably good idea of the current value.”[10] The owner opinion rule would not apply to an asset such as a business or the present cash value of a defined benefit, unless of course the owner can qualify as an expert in these areas. Some courts have allowed owner’s valuation testimony without any foundation establishing knowledge, allowing the testimony to go to the weight.[11] But the general rule is that an owner’s testimony should be rejected when “special circumstances exist which indicate that he is unfamiliar with facts that give the property value.” [12] The testimony must show the basis of the owner’s knowledge. The opposing party may make the showing of a lack of knowledge on cross-examination, “revealing the absence of probative value in the testimony.”[13]

When a proper foundation can be established, owner opinion testimony is a convenient way of proving certain asset values if an expert is unaffordable. At a minimum, the witness should testify to their familiarity with the marketplace and the basis of their opinion.[14] The appropriate foundation for lay testimony requires the following: familiarity with the property in question; actual knowledge of the value of the subject property; and the basis of the knowledge of that value, i.e.,how, when and where the witness obtained the knowledge.[15] Typically, in establishing value of real estate, the owner would testify to their knowledge of the marketplace based upon sales in the neighborhood and other specific facts within their knowledge; but what about an owner’s reliance on facts that are hearsay?

At least one court has allowed a lay witness to rely on hearsay information as a basis for their opinion. In Behrens v. W.S. Bills & Sons, Inc.,[16] the appellate court sustained a witness’s use of hearsay information. The court provide that the owner witness could establish value of furniture based upon their knowledge of prevailing prices of similar items based on shopping with friends, window shopping, noticing newspaper advertisements and hearing radio advertisements.[17]

The newly crafted Illinois Rules of Evidence support the use of reliable hearsay information to value assets. Illinois Rule of Evidence 803(17) allows, as an exception to the hearsay rule, “Market quotations, tabulations, lists, directories, or other published compilations, generally used and relied upon by the public or by persons in particular occupations.” This exception permits one to submit a Kelley Blue Book valuation report, for example, to prove up the value of automobiles. It would also allow the admission of market reports to value publicly traded stock. This rule is a helpful resource for quick and cheap proof in a divorce case.

The case law and rules of evidence suggest that courts should liberally allow an owner to testify to the facts relied upon in formulating an opinion.  In a bench trial, when the court can consider the weight of the testimony, the court should allow a lay witness to state the basis of the opinion, even if it relies upon hearsay or other inadmissible information. If the witness considers unreliable or uncertain information, the court can reject the lay opinion as immaterial.

Conclusion. We regularly consult experts to prove the value of complicated assets such as business interests or defined benefit plans. But valuation of more routine assets is often overlooked while we focus on preparing our proofs for more complicated (and valuable) assets. Use stipulations or agreements wherever possible. In the absence of an agreement, consider using your client to establish value. Help them prepare for the hearing to testify to the basis of their opinion and the underlying facts they considered in formulating the opinion.

[1] 750 ILCS 5/501 et. seq. (2010)

[2] 750 ILCS 5/503(f); In re Marriage of Lundahl, 396 Ill App 3d 495 (Ill.App. 1st Dist. 2009).

[3] V.Z. v. M.Z., 287 Ill App 3d 552, 678 NE2d 1070 (Ill.App. 1st Dist. 1997).

[4] Ill R. Evid. 702.

[5] People v Sawhill, 299 Ill 393, 132 N.E. 477  (1921).

[6] See also, Wilson v Clark, 84 Ill 2d 186, 417 NE2d 1322 (1981) (An expert may base his or her opinion on scientific, technical or other specialized knowledge including facts and opinions contained in a learned treatise, first-hand observations, facts and opinions introduced into evidence and facts and opinions not admitted into evidence where such facts are reasonably relied upon by experts in the field.).

[7] 293 F 1013 (DC Cir. 1923).

[8] In re Marriage of Gunn, 233 Ill App 3d 165, 598 NE2d 1013 (Ill.App. 5th Dist. 1992)(The trial court must consider the relevant evidence before it; determine the credibility of the experts, the reasonableness of their testimony, the weight given to each of them, and their expertise in the particular area of valuation; and then determine fair market value).

[9] In re Marriage of Vucic, 216 Ill App 3d 692, 576 NE2d 406, (Ill.App. 2nd Dist. 1991).

[10] Id. at 703.

[11] See, e.g., Department of Transportation v Harper, 64 Ill App 3d 732, 381 N.E.2d 843 (Ill.App. 5th Dist 1978).

[12] Id. (An owner’s opinion was rejected when she did not know how her home compared to other’s in the area and her opinion was based upon what an unidentified appraiser told her a few months earlier).

[13] Hill v Ben Franklin Savings & Loan Association, 177 Ill App 3d 51 at 56, 531 NE2d 1089 (Ill.App. 2nd Dist. 1989).

[14] Kim v Mercedes Benz, USA, Inc., 353 Ill. App. 3d 444, 818 NE2d 713 (Ill.App. Dist 1 2004).

[15] Id. at 723-24.

[16]5 Ill. App.3d 567, 283 NE 2d 1 (Ill.App. 3rd Dist. 1972).

[17] Id. at 572.

Steven N. Peskind is the principal of the Peskind Law Firm based in St. Charles. Mr. Peskind is a faculty member of the ABA/NITA Family Law Trial Institute and a fellow of the American Academy of Matrimonial Lawyers. He is the author of the forthcoming "Family Law Trial Evidence Handbook" to be published by the ABA in the spring of 2012.

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