Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. BD401600 Maren Nelson, Judge.
Greines, Martin, Stein & Richland, Marc J. Poster and Jennifer C. Yang for Appellant.
Buter, Buzard, Fishbein & Royce and Glenn S. Buzard for Respondent.
FLIER, J.
Joan M. Price appeals from the trial court’s order setting the value of a closely held corporation formed by her former spouse Richard Turkanis before marriage and sold during their marriage. We granted Price’s motion to appeal the valuation order. Having considered the interlocutory appeal, we affirm.
FACTS AND PROCEDURAL HISTORY
Price and Turkanis married on March 31, 1995. Turkanis petitioned for dissolution of their marriage on February 10, 2004.
Prior to the marriage, Turkanis started a closely held business known as Radiology Management Systems, Inc. (Radman). As of the date of marriage, Turkanis held a 78.8 percent share of Radman. In 1998, Radman was acquired by a company called InfoCure, and Radman shareholders received InfoCure stock valued at $9,450,000. The 78.8 percent share of Radman was exchanged for InfoCure stock having a value of $7,446,085.
Before trial, the parties stipulated that Radman was Turkanis’s separate property at the date of marriage and that Radman increased in value after marriage. The parties also agreed to value the community’s interest under the equitable allocation principles set forth in Pereira v. Pereira (1909) 156 Cal. 1 (Pereira). Therefore, the only issue tried before the court concerned the valuation of Radman on the date of marriage.
Under Pereira, the community is entitled to receive the increase in profits of a spouse’s separate property attributable to community endeavors, and the court must apportion profits derived from community effort to the community. (Pereira, supra, 156 Cal. at p. 7.)
Also before trial, the parties stipulated pursuant to Pereira that Radman was sold during the marriage for $9,450,000 of InfoCure stock. The parties also stipulated that if a value for Radman as of the date of marriage was established, Turkanis would be entitled to a rate of return of 7.19 percent in simple interest on that value from the date of marriage, and the remainder of the purchase price would belong to the community.
The court bifurcated the trial, and the parties tried the issue of the valuation of Radman as of the date of marriage first, resulting in the order on appeal.
Trial of the bifurcated issue commenced on May 19, 2008.
Turkanis, a radiologist, testified he started Radman in 1986, at a time when he was still practicing medicine. From the date of marriage in March 1995 through Radman’s sale in December 1998, Turkanis devoted all his time and efforts to Radman. Radman primarily had two products: (1) radiology information software (RIS) and (2) image management systems software (PACS). By 1995, the two systems were available on an integrated basis so that a purchaser could obtain both the “image” (sonogram, X-ray, etc.) and the narrative patient information on the same sheet of paper. Radman mainly directed its sales efforts to outpatient radiology imaging centers. The products generated two income streams: first, an upfront cost of about $100,000 for hardware (if desired), software, data conversion, training and customer support; and second, ongoing annual licensing fees of about $10,000 to $15,000.
According to Radman’s compiled financial statements, in the fiscal year ended January 31, 1994, Radman had gross revenues of $3,520,317 and a net taxable income of $397,320. In the year ended January 31, 1995, two months before the marriage, Radman had gross revenues of $2,733,683 and had a net loss of $328,551. By March 31, 1995, the company had spent approximately $3,000,000 in research and development for various software programs.
Turkanis’s forensic accounting expert, David Blumenthal, indicated at trial that Radman’s business plan reflected slightly different numbers than its published financial statements, but he did not believe the differences were material for his purposes. He considered the published financial statements to be a better representation of the company’s financial condition because they were compiled by accountants.
Turkanis testified the decline in income for the year ended January 31, 1995, was due to several “temporary” factors, including: (1) the so-called Stark legislation, which became effective July 1994, that prohibited doctors from referring patients to any outpatient diagnostic center in which the doctor had an ownership interest; (2) uncertainty due to potential government regulation of healthcare finance and payment systems that might affect Radman’s customers; and (3) the need for restructuring and retraining of Radman’s sales force.
Turkanis testified the decline in revenue had begun to resolve itself by 1995.
Three experts testified regarding Radman’s valuation.
Turkanis’s forensic accounting expert Blumenthal calculated Radman’s value based on three methods: the capitalization of cash flow method ($2,627,000), the capitalization of excess earnings method ($1,047,000), and a comparable transaction analysis ($6,021,000). Although he calculated a valuation under all three methods, Blumenthal gave no weight to the results reached by calculations under the first two methods, because he believed they did not take into account the substantial research and development costs incurred by startup companies such as Radman. He gave all of the weight to the comparable transaction method, which he indicated was the one most commonly used in evaluating companies at the startup or developmental stage in high-tech industries where there are expectations of rapid growth but no current profits. However, in performing his comparable transaction valuation, Blumenthal used data on comparable sales after the valuation date because his office did not have materials at hand for earlier years.
The capitalized cash flow method takes “normalized” historical cash flow and divides that amount by a capitalization rate to determine the value of the company’s equity.
The excess earnings method determines whether the business can generate excess earnings after providing for an economic return on the tangible investment necessary for the operation of the business. If so, the excess earnings are capitalized.
The guideline transaction or comparable sales method identifies sales of other similarly situated businesses, reviews data regarding the sales and compares the sales prices with revenues to derive a median multiple to apply to revenues to obtain a weighted value of the company.
Price’s forensic accounting expert, Alfred Warsavsky, testified he considered all three methods in reaching a valuation for Radman. Under all three methods, he calculated the value of the corporation on the date of marriage to be “zero.”
Michael Cannavo, a consultant in the radiology information and software system industry, testified for Price that none of the companies Blumenthal considered to be comparables was in the radiology software industry as of the date of marriage. Based on feedback from his clients, Cannavo testified that Radman’s RIS system had a very good reputation; its image system, however, did not have the same reputation. Cannavo recalled that from the early 1990’s to 1995, Radman was a dominant vendor in RIS systems sold to outpatient treatment centers, and it was one of the first two companies that offered an integrated system bringing both text and imaging to the market. According to Cannavo, two or three sales of other radiology software companies occurred from 1991 to 1995. However, Cannavo had no specific data regarding those sales, and he did not identify the sellers or buyers.
After taking evidence and hearing argument, the trial court issued an oral tentative ruling.
The trial court initially addressed the issue of which side had the burden of proof with respect to the value of the business as of the date of marriage, and it concluded that neither party had the burden of proof. The second issue, the court indicated, was the value of Radman as of the date of marriage on March 31, 1995. Both counsel argued, and the court agreed, that the correct approach to valuation was to determine the fair market value of Radman as of such date. The court decided there was no “per se correct method for valuing a closely held corporation” such as Radman, and it was for the court to determine “which of the recognized evaluation approach[es] most effectively achieves substantial justice between the parties” under all the facts. The trial court noted that, in addition to both parties, it heard testimony from three experts: Blumenthal on behalf of Turkanis and Cannavo and Warsavsky on behalf of Price. Price had argued that Radman should be valued by either the excess earnings or capitalization of cash flow valuation method. Turkanis had argued for a “comparable” company analysis.
The court tentatively ruled that given the high-tech, startup nature of Radman and the current market, valuation of the company by either the excess earnings or capitalization of cash flow valuation method was not appropriate and that the comparable company analysis was the best way to value the company. However, the court found insufficient reliable evidence of comparables on which to base a ruling on Radman’s value.
The court indicated the comparable sales presented by both parties’ experts were unreliable because they were not shown in fact to be comparable and they also postdated the valuation date. Regarding its view of subsequent transactions, the court relied upon Price’s tender of a portion of a treatise on valuation in forming that view.
The court set the matter for further testimony. (See In re Marriage of Hargrave (1985) 163 Cal.App.3d 346, 355 (Hargrave) [after rejecting all testimony concerning goodwill valuation, leaving a record barren of evidence on issue, court must either require parties to furnish additional evidence or appoint its own expert].) However, it declined to give the parties further guidance on how additional evidence of comparables was to be presented.
Prior to the hearing of additional testimony on the issue of comparable sales, Price made, and the trial court denied, a motion in limine to exclude all expert testimony valuing Radman by any method other than the excess earnings or capitalization of cash flow approaches. Price argued existing financial records on Radman were sparse and difficult to verify and that Turkanis had failed to produce further records. She further asserted only comparables for sales that actually closed before the date of marriage could be presented.
The trial court proceeded to take additional testimony from the parties and from additional experts Thomas Neches, on behalf of Price, and Bret Tack, on behalf of Turkanis on the valuation of Radman. Price argued that Turkanis bore the burden of proof on Radman’s value as of the date of marriage. Turkanis, on the other hand, argued that Price bore the burden of proof as the party seeking the community interest on separate property.
After additional argument, the court issued an oral ruling, followed by a written ruling. The court rejected cases regarding the burden of proof used in the characterization of property, noting there was no issue of characterization in this case because the parties had stipulated that Radman was Turkanis’s separate property at the date of marriage and that a Pereira allocation should be applied to determine Radman’s value as of the date of marriage. Instead, citing the parties’ stipulations and the fact that both parties had tendered evidence of values, the court concluded that neither party had a requirement to meet a burden of proof. The court decided that it was the court’s burden to weigh all the evidence tendered by both sides and to determine from such evidence a fair market value for the business.
Reviewing all the evidence, the trial court concluded the value of Radman as of the date of marriage was $6,252,000.
In reaching this conclusion, the court found that the existing financial records regarding Radman were reliable, the records provided sufficient basis on which to form an opinion, and that Tack’s opinion was credible whereas that of Price’s expert Neches was not. The court pointed to the “considerable” testimony at trial regarding the company’s products at the date of valuation, its standing in the industry, number of employees, the nature of the market generally, the impact certain federal legislation had on the industry in 1995 and the identity of its competitors, all of which factors the court took into consideration. The court further noted that sufficient records existed as of the valuation date so that a potential buyer could have valued Radman at that time and also that when the company was sold in 1998 at least some of the types of records Price claimed were needed were available to the buyer. In addition, the court observed that three experts were able to place a value upon Radman as of the date of marriage based on the available financial data; in fact, Turkanis’s expert Tack opined the available information was greater than what was available in “dozens and dozens” of valuations he had previously performed. The court likewise disposed of other arguments raised by Price respecting the reliability of available financial data.
Existing at the time of trial were “compiled, ” i.e., unaudited and unreviewed, financial statements for Radman comprised of a balance sheet and income statement for the fiscal years ended January 31, 1994, 1995 and 1996 prepared by a certified public accountant after the valuation date, together with a business plan Turkanis created in 1996. In addition, there were some records from the 1998 stock transaction when the company was acquired. However, most of Radman’s accounting records had gone to the third party when Radman was sold in 1998. Any records remaining at the date of separation were in Price’s custody at the family residence. Price had been the in-house counsel for Radman for five years prior to its sale, and she participated in the negotiations when the company was sold to the third party. The court expressly found that many of the records of Radman no longer existed, through no fault of either party.
The court concluded that although the lack of backup financial data made the task of engaging in a forensic valuation more difficult, it was not impossible; taken in its totality, there was sufficient information available to expert Tack to form his opinion.
Price timely appealed from the order.
CONTENTIONS
Price contends the order must be reversed because: (1) the proceeds of Radman’s sale were acquired during marriage and therefore were presumptively community property; (2) Turkanis had the burden of overcoming the community property presumption and proving what portion, if any, of Radman proceeds should be characterized as his separate property; (3) the trial court prejudicially erred in failing to assign Turkanis the burden of proof; (4) having failed to meet his burden of proof, Turkanis was not entitled to a “second bite” of the apple; (5) even with a “second trial, ” Turkanis failed to carry his burden of proof as his new expert gave only a “calculation, ” not a conclusion, of value; and (6) the trial court decision was otherwise “fatally flawed.” For the reasons set forth below, we disagree.
STANDARD OF REVIEW
We apply established standards of review: “‘Questions of fact concern the establishment of historical or physical facts; their resolution is reviewed under the substantial-evidence test.’ [Citation.]... [Citation.] [¶] ‘Questions of law relate to the selection of a rule; their resolution is reviewed independently.’ [Citation.] Likewise, where mixed questions of fact and law require ‘a critical consideration in a factual context, of legal principles and their underlying values, the question is predominantly legal and its determination is reviewed independently. [Citation.]’ [Citations.]” (Bono v. Clark (2002) 103 Cal.App.4th 1409, 1421 (Bono).) A trial court’s exercise of discretion “will be disturbed only for clear abuse.” (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) “‘A judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown.’” (Ibid.) If there is a conflict of evidence, the finding of the lower court is not open to review on appeal. (Estate of Duncan (1937) 9 Cal.2d 207, 217 (Duncan).)
Here, we apply the substantial evidence test to the trial court’s factual findings as to the existence and character of the parties’ property, and the de novo test to the court’s selection of what legal principles to apply. (Bono, supra, 103 Cal.App.4th at p. 1421; In re Marriage of Ettefagh (2007) 150 Cal.App.4th 1578, 1584 (Ettefagh).) The trial court’s ruling with respect to the taking of additional evidence is subject to the abuse of discretion standard. (Bazet v. Nugget Bar Placers, Inc. (1931) 211 Cal. 607, 612 (Bazet).)
DISCUSSION
1. Presumption of Community Property
All property acquired during marriage is presumed to be community property unless it comes within a specific exception. (Fam. Code, § 760; In re Marriage of Haines (1995) 33 Cal.App.4th 277, 289 (Haines).) The community property presumption is merely “a rebuttable presumption affecting the burden of proof; hence it can be overcome by the party contesting community property status.” (Haines, at p. 290; see also In re Marriage of Mix (1975) 14 Cal.3d 604, 611-612.) And, whether the presumption is overcome is a question of fact for the trial court. (Mix, at p. 612.)
Price makes an ingenuous argument that because Radman was sold during marriage, the proceeds of the sale were presumptively community property. That argument is at odds with the stipulation under which the case was tried, the trial court’s factual findings and the law. Before the bifurcated trial, the parties stipulated that Pereira would apply to the proceeds of the Radman sale. The trial court correctly found that stipulation to be an implicit agreement that Radman was Turkanis’s separate property at the time of marriage. (Pereira, supra, 156 Cal. at p. 7; see In re Marriage of Koester (1999) 73 Cal.App.4th 1032, 1039-1040 (Koester).)
In Koester, the court stated: “It should be remembered that the original Pereira case involved a separate saloon and cigar business.... [Citation.] The trial court allocated all the ‘gains’ from the business after marriage to the community, but the California Supreme Court reversed, reasoning that the ‘capital’ of the business was ‘undoubtedly’ the owner spouse’s separate estate and, further, ‘some of the profits were justly due to the capital invested.’ [Citation.] The high court said it was error to classify those ‘gains’ as community property. [Citation.]” (Koester, supra, 73 Cal.App.4th at p. 1036.)
Moreover, the character of property is determined as of the date of acquisition. (Haines, supra, 33 Cal.App.4th at p. 291.) In this case, it was undisputed that Turkanis acquired all of his shares in Radman before marriage. As such, those shares were Turkanis’s separate property. (Fam. Code, § 770, subd. (a)(1); see also Cal. Const., art. I, § 21 [“Property owned before marriage... is separate property”].) The sale of those shares in exchange for shares of InfoCure during the marriage could not alone convert separate property to community property. The character of property as separate or community is fixed as of the time acquired, and the character so fixed continues until changed in some legally recognized manner, such as the agreement of the parties. (In reMarriage of Rossin (2009) 172 Cal.App.4th 725, 732; Koester, supra, 73 Cal.App.4th at p. 1037.) Separate property continues to remain so with the exception of “‘such increase thereof as may have been due to the contributions of the community by virtue or capital or industry.’” (Rossin, supra, at p. 733.)
Price’s argument that all of the proceeds from the sale of Radman should be presumed to be community property thus is unavailing.
2. Burden of Proof
Price asserts that the party asserting a separate property interest has the burden of overcoming the community property presumption by a preponderance of the evidence.
This assertion has some truth so far as it goes. (See Duncan, supra, 9 Cal.2d at p. 217 [“The burden of producing clear and satisfactory proof that the property was the separate property of decedent was upon the contestant as the respondent was entitled to rely upon the presumption that it was community property”]; Haldeman v. Haldeman (1962) 202 Cal.App.2d 498, 501 (Haldeman) [“The presumption is that this property is community and the burden of proof was upon respondent to prove by a preponderance of the evidence that the business was his separate property”]; see also Evid. Code, § 115 [“Except as otherwise provided by law, the burden of proof requires proof by a preponderance of the evidence”]; Ettefagh, supra, 150 Cal.App.4th at pp. 1585-1586 [finding no constitutional or statutory provision requiring burden of proof other than by preponderance of evidence to rebut community property presumption]; see 2 Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2010) ¶ 8:362.1 [preponderance of evidence standard applies under current authority].) In Duncan, Jolly and Haldeman, however, the issue was the characterization of the property.
In the present case, the parties essentially stipulated that Radman was the separate property of Turkanis on the date of marriage so characterization of Radman as separate property of community property was not at issue. At issue was the value of Radman as of the date of marriage. The parties disagree over who bore the burden of proof of establishing such value. We conclude the issue of who had the burden of proof does not matter. At the end of the day, the trial court found Turkanis’s evidence to be the more persuasive. Thus, regardless of who had the burden of proof on this issue at trial, the result would be the same. (See People v. Watson (1956) 46 Cal.2d 818, 836.)
3. Reopening Evidence
Price contends that when, at the end of the “first” trial, the trial court found no value for Radman had been established, the court erred in “not applying the community property presumption and ruling that [Turkanis] was not entitled to any portion of the Radman sale proceeds as his separate property.” We disagree.
A long line of cases establishes that the trial court has inherent power to reopen the evidence upon determining the record contains insufficient basis to allow an informed decision. (Bazet, supra, 211 Cal. at pp. 611-612 [when evidence “silent as to an important matter, ” court did not abuse discretion in reopening case before judgment signed]; Alvak Enterprises v. Phillips (1959) 167 Cal.App.2d 69, 74 [“Under well-settled principles, a trial court may set aside an order of submission and permit the introduction of additional evidence relevant to a pending issue of fact...”]; Lewis v. Johnson (1955) 132 Cal.App.2d 635, 637 [“it is within the discretion of a trial court to reopen a cause at any time before a trial has been concluded and its decision has been rendered”].)
Apart from case law, statutory authority exists for the court’s reopening of evidence before entry of judgment. (Code Civ. Proc., §§ 607 [in jury trial, court may for good reason and in furtherance of justice allow parties to offer additional evidence], 631.7 [unless court otherwise directs, trial shall proceed in order specified in § 607]; see also Code Civ. Proc., §§ 128, subd. (a)(3) [court has power to provide for orderly conduct in its proceedings], 187 [when jurisdiction conferred by constitution or statute upon court or judicial officer, “all the means necessary to carry it into effect are also given, ” and any suitable process or mode of proceeding conformable to spirit of code may be adopted].)
Indeed, in the context of a dissolution proceeding, when a record lacks evidence on a vital issue, it is error for the court not to take further evidence on the matter. (Hargrave, supra, 163 Cal.App.3d at p. 355.) In Hargrave, the referee correctly disregarded the testimony of the husband and his experts concerning the goodwill value of a consulting business as they based their valuation upon improper assumptions. This left only the wife’s evidence on that issue remaining in the record. (Id. at p. 353.) Wife’s expert ascribed a value of $100,000 to goodwill, but the court valued goodwill at $35,000, a figure having no support in the record. (Id. at pp. 352-354.) The appellate court reversed the resulting judgment, saying: “The referee, having decided to reject all of the testimony on the subject of goodwill valuation, was left with a record barren of evidence on this vital issue. Under this circumstance the referee should have required the parties to furnish additional evidence or he should have appointed his own expert to testify on that issue. [Citation.]” (Id. at p. 355, citing Evid. Code, § 460 [court may appoint expert when “advice of persons learned in the subject matter is required”].)
As the foregoing discussion makes clear, and contrary to Price’s assertions, there was no “second trial, ” “do-over” or “second bite at the apple” in this case and no abuse of discretion in the court’s reopening of the evidence once it found the lack of “vital” information on the matter at issue. Rather, the trial court had both inherent and statutory authority to request additional evidence pursuant to its obligation to control proceedings before it, and to perform its core function as the finder of fact.
4. Substantial Evidence
Price contends Turkanis failed to establish a value for Radman as of the date of marriage with any competent evidence. Specifically, Price asserts Turkanis in the second trial phase again relied on postvaluation date transactions even though the court had rejected such transactions in the first trial phase. She asserts Turkanis’s new expert Tack only performed a market analysis to the exclusion of any other valuation method, and he merely offered a “calculation” rather than an expert conclusion of value. Additionally, Price argues that none of Tack’s guideline transactions was comparable to Radman because of its unique business, history and financial situation.
Under Evidence Code section 801, an expert is limited to an opinion based on matter that “reasonably may be relied upon by an expert in forming an opinion upon the subject to which his testimony relates, unless an expert is precluded by law from using such matter as a basis for his opinion.” (See also Lockheed Litigation Cases (2004) 115 Cal.App.4th 558, 563 [matter expert relies upon must provide a reasonable basis for the particular opinion offered].) An expert’s opinion cannot rise to the dignity of substantial evidence when he bases his conclusion upon assumptions that are not supported by the record, upon matters that are not reasonably relied upon by other experts, or upon factors that are speculative, remote or conjectural. (Pacific Gas & Electric Co. v. Zuckerman (1987) 189 Cal.App.3d 1113, 1135.)
We conclude the court properly relied on the testimony of Turkanis’s experts together with other evidence appearing in the record, and its valuation is well supported by the record as supplemented by the additional evidence adduced in the second phase of trial.
A. Postvaluation Date Transactions
In the case at bar, the trial court issued a lengthy oral tentative ruling on June 20, 2008, after hearing all the evidence presented by the parties at trial. The court initially provided in its tentative statement of decision a detailed summary of the evidence, noting Turkanis’s expert Blumenthal had testified that Radman should be valued by looking at the sales of comparable companies, in particular the ratio of market value of invested capital to the revenue, to obtain a ratio of price to revenue.
Both Blumenthal and Price’s expert Warsavsky agreed this was an accepted method of valuation of small companies. Blumenthal testified this method is commonly used in evaluating companies that are at the startup stage or developmental stage in the high-tech industry in which there may be no profits, only a high expectation of rapid growth. Without contradiction, he testified that when such high-tech startups are bought and sold, it is typical to talk about multiples of gross revenues as a measure of value even if the company has no net earnings, and such companies sell for large amounts of money. But, Blumenthal frankly admitted during his testimony that he had used later comparable sales because earlier comparables were not at hand in his office, and he made no attempt to get earlier data.
In June 2008, based on the evidence so far presented, the court tentatively concluded: (1) the comparable company methodology was the best method to use in valuing Radman; but (2) Blumenthal’s testimony of comparable sales was not sufficiently reliable because he had used only “after the fact” transactions in his analysis, i.e., sales concluded after the March 31, 1995 valuation date. On the other hand, the court noted, Cannavo had testified comparable prior sales in the radiology business in fact existed in the same data base, and he had identified two or three transactions without providing specific details. The court therefore decided to take additional evidence “on the issue of the comps only, ” leaving to counsel the decision as to how they wished to address that issue. In July 2008, the court determined the trial would resume in November 2008. The court then continued that date to January 2009.
Shortly before the trial’s resumption, Price filed a motion in limine to preclude Turkanis from offering any expert testimony valuing Radman by any methodology other than the “excess earnings” or “capitalization of cash flow” methods. Price argued a lack of sufficient financial records precluded a proper valuation of Radman based on a “comparable company” analysis. About the same time, Price made an ex parte application to strike the testimony of Turkanis’s new valuation expert Tack on various grounds. Price asserted that Tack’s opinion was based on seven transactions, six of which postdated the valuation date, and accordingly his testimony would be based on foundational evidence that the court had already found improper in its tentative statement of decision. The court, however, denied Price’s application to strike Tack’s testimony, ruling that Price’s objections went to the weight of the evidence, rather than its admissibility. It also denied Price’s motion in limine on similar grounds.
In the second trial phase, Tack opined on Turkanis’s behalf Radman had an equity value of $6,252,000 at the valuation date. Tack indicated a search of numerous data bases for sales transactions of companies primarily selling information or imaging systems to medical practices, hospitals or other health care providers produced over 40 candidates for consideration. He found dramatically fewer transactions for such companies in the 1993 through 1994 period as compared with the year 1995. Of eight identified transactions of comparable company sales, only one occurred prior to March 31, 1995.
Tack testified that the propriety of using subsequent information in business valuations is the subject of differing interpretations among appraisers. However, the prevailing sentiment is that while it is not appropriate to consider subsequent events affecting value, it is appropriate to consider subsequent events that provide evidence of value that existed on the valuation date. Tack stated that comparative guideline transactions generally occur infrequently, but when available they are often among the most compelling indicators of value for the subject company. Tack opined that use of comparative transactions occurring within a reasonable period of time after the valuation date is a “relatively common” practice in business appraisal.
With respect to Radman in particular, Tack considered the use of subsequent acquisitions to be highly suitable under the present circumstances, which included: a dearth of transactions in the period immediately preceding the date of marriage; the availability of six acquisitions occurring within a year of the valuation date, including three companies selling radiology systems, one a competitor of Radman; the relatively brief time span covered by the subsequent transactions; the fact that the transactions occurred after the Stark law; and the likelihood that, because sale transactions take many months to consummate, the 1995 transactions were probably past the initial offer stage as of the valuation date. Tack testified it was his custom and practice in appraising companies to rely upon subsequent events that provided evidence of value. Tack opined a value for Radman after analyzing such data and adjusting for variables.
In preparing for his testimony, Tack reviewed and cited an article by Shannon Pratt, entitled, “Should Subsequent Events be Considered in the Present Value of the Business Entity?” which was a trial exhibit and provided additional support for this position. The trial court specifically noted that this article expanded upon the same ideas contained in a textbook by Pratt, an excerpt of which Price had proffered as an exhibit during the first trial phase.
Based on Tack’s analysis and explanation, there was no error in the consideration of such postvaluation date guideline transactions, as they were demonstrated to be a reliable basis on which to form an opinion.
B. Market Analysis
Price further attacks Tack’s testimony on the ground that he declined to provide an opinion as to fair market value and gave only a “calculation” rather than a “conclusion” of value. She misconstrues the record.
Price places too much reliance upon Tack’s testimony that he prepared a “calculation” rather than an appraisal. Tack’s assignment was to research guideline (i.e., comparable) acquisition transactions for the purpose of comparing those transactions to Radman as of March 31, 1995. In fact, Tack testified that only if he had considered all other valuation approaches and methods, and determined they were not relevant or not applicable, would he consider his report to be an “appraisal.”
Tack followed the standards promulgated by the American Society of Appraisers, which defined a “calculation” as one “based upon conceptual approaches agreed upon with the client.” In the present case, the court reopened the evidence only as to “comps, ” and Tack was instructed by counsel accordingly.
Tack did a guideline valuation in the present case because he was advised that is what the court had requested; he considered the work he performed to be a “calculation” as opposed to an “appraisal” because he was given instructions as to the method to be utilized. If the guideline transaction method were determined to be the appropriate method of valuation, Tack indicated, his report would reflect his opinion as to the fair market value of Radman as of the valuation date.
Whether labeled a “calculation” or “conclusion, ” Tack’s analysis was valid evidence upon which the trial court properly relied.
C. Comparable Sales Transactions
Price asserts the trial court’s valuation of Radman was based on sales that were not comparable in that the sales were of dissimilar companies; with a single exception, they occurred on dates subsequent to the valuation date; only limited information was available concerning the sales; and the comparison was based on the “weakest indicator” of value.
Tack testified that typically in performing a search for guideline companies one looks for a company in a similar line of business affected by like economic conditions; ideally, one seeks to find a guideline transaction giving some benchmark or reference point to apply to the subject company. Tack’s review included a search of a number of commonly used databases, including an in-house proprietary database of about 1, 500 transactions and public filings of acquisitions in the industry. The search was for guideline companies in the healthcare information systems industry for the years 1993 to 1995, or earlier in some cases.
In general, the guideline companies selected for comparison in this case were primarily software companies having intellectual property they licensed to the market. In Tack’s experience, it was rare to find a direct competitor among guideline companies with a transaction in the same year as the valuation date. One company uncovered in this instance (Consort) he considered to be the most suitable for comparison with Radman. Consort was a direct competitor of Radman, marketed the same product and was comparable in size in terms of sales. Nonetheless, there were differences between the companies, and Tack made adjustments in taking that company into consideration to account for those differences. Of the remaining guideline companies, one group had radiology-type products and the other did not carry radiology products but fell into the broader healthcare information system category.
In short, Price’s complaints are addressed to the weight rather than admissibility of the evidence provided by Tack. They are in the nature of requests to this court to reweigh the evidence. In valuing a spouse’s separate property in the course of dividing community property equally, the trial court may opt for whichever method of determination will achieve substantial justice. (See Haldeman, supra, 202 Cal.App.2d at p. 505.)
So long as the trial court’s determination is within the range of the evidence presented, the court has broad discretion to determine the value of community assets. (In re Marriage of Cream (1993) 13 Cal.App.4th 81, 88.) That same principle applies to the valuation of separate property in the course of a determination under Pereira. In the case at bar, the trial court’s valuation of Radman on the valuation date, $6,252,000, coincided precisely with the value arrived at by expert Tack. We thus find no error in the court’s determination.
DISPOSITION
The judgment is affirmed. Turkanis is to recover his costs on appeal.
WE CONCUR: RUBIN, Acting P. J., GRIMES, J.