20CA1385 Marriage of McCarthy 01-27-2022
COLORADO COURT OF APPEALS
Court of Appeals No. 20CA1385
Larimer County District Court No. 18DR30131
Honorable Julie Kunce Field, Judge
In re the Marriage of
Victoria McCarthy,
Appellee,
and
Timothy McCarthy,
Appellant.
ORDERS AFFIRMED IN PART, REVERSED IN PART,
AND CASE REMANDED WITH DIRECTIONS
Division I
Opinion by JUDGE FOX
Schutz and Graham*, JJ., concur
NOT PUBLISHED PURSUANT TO C.A.R. 35(e)
Announced January 27, 2022
Lathrop Law Office, P.C., Diane M. Lathrop, Fort Collins, Colorado, for Appellee
The Law Offices of Rodger C. Daley and Associates, Rodger C. Daley, Kerry
Lego, Carrie Vonachen, Dorian Geisler, Denver, Colorado, for Appellant
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2022.
1
¶ 1
In this post-dissolution of marriage proceeding between
Timothy McCarthy (husband) and Victoria McCarthy (wife),
husband appeals from two district court orders, one granting wife’s
motion to set aside certain provisions of the parties’ separation
agreement and the other denying him spousal maintenance. We
affirm the former, reverse the latter in part, and remand the case
with directions.
I. Relevant Facts
¶ 2
The parties married in 1997 and later became parents of two
children, but only the youngest, born in 2003, is a minor.
¶ 3
In March 2018, wife petitioned to dissolve the marriage.
Around this time, wife was a physician and husband was a solo law
practitioner. In November, a vocational evaluator reported that
husband had described his efforts to expand his legal practice to
include cannabis work:
He had been working with a client in the
cannabis industry to provide legal
representation to them, but he was not sure if
this would pan out. He did not get paid for his
work on that case. He recently took a webinar
about practicing law in that field and he
doubled his legal malpractice insurance. He
noted [that] he had another client who was a
hemp manufacturer, but that fell through too
2
when the product was inspected and found to
be deficient.
¶ 4
In April 2019, the district court dissolved the marriage and
incorporated the parties’ separation agreement into its decree. The
agreement provided that (1) wife would pay husband contractual
maintenance on a step-down basis, beginning at $4,500 per month
for about four years; and (2) husband would pay wife child support
in the amount of $840 per month. The parties based those
obligations on wife earning $22,247 per month and husband, who
was now working as a new associate at the Kingsford law firm,
earning $4,500 per month.
¶ 5
In August, wife moved to set aside the separation agreement
under C.R.C.P. 60(b)(2) and C.R.C.P. 16.2(e)(10). She alleged that
she relied on husband’s representation that he was not earning an
income from legal work he performed for Pono Lifestyles, a CBD
business, starting when he was a solo practitioner and continuing
“on the side” through his employment with Kingsford. Wife also
sought an award of attorney fees and costs under C.R.C.P. 16.2.
3
¶ 6
On March 10, 2020, following an evidentiary hearing (first
hearing) at which only the parties testified, the district court
granted wife’s motion. The court found that
as an attorney with family law experience, husband was
“well aware” of the disclosure requirements of C.R.C.P.
16.2;
“there [was] no dispute that [husband] did not disclose
documents related to his work with . . . Pono”;
the undisclosed documents were material as they related
to husband’s income or income capacity when the parties
decided child support and maintenance, the “critical
issue . . . at the time of the dissolution”;
one document in particular showed that his “work as an
attorney [was] worth at least $9,000 per month to Pono
since at least December 2017”;
husband’s “assertions that he relied on the advice of his
attorney in not disclosing the Pono . . . documents along
with other information (such as bank account
information . . . he received)” were not credible; and
wife withdrew her request to reopen the property division.
4
From those findings, the court set aside the maintenance and child
support provisions of the separation agreement. It then set the
matter for another evidentiary hearing (second hearing) to consider
drawing a negative inference arising from husband’s discovery
violations, determine husband’s income, reconsider maintenance
and child support, and address wife’s request for attorney fees and
costs under C.R.C.P. 16.2.
¶ 7
After the second hearing, the district court issued a written
order on June 24, 2020. Given husband’s failure to disclose certain
information in discovery, the court drew a negative inference about
his income and found that he had earned or was capable of earning
$9,000 per month. Along with his income of $4,333 from
Kingsford, it concluded that his total monthly income was $13,333.
The court then denied husband’s maintenance request and ordered
him to repay all the maintenance he received from May 2019
through March 2020. The court also awarded wife her attorney fees
and costs for husband’s failure to fully disclose his financial
information under C.R.C.P. 16.2.
¶ 8
Husband appeals the district court’s March 10 order setting
aside the maintenance and child support provisions of the
5
separation agreement, and the June 24 order denying him
maintenance and awarding wife her attorney fees and costs. We
address each in turn.
II. March 10 Order
¶ 9
To begin, husband states, and we agree, that the district court
could not rely on C.R.C.P. 16.2 as a basis for setting aside the
maintenance and child support provisions of the separation
agreement, especially after wife withdrew her request to reopen the
(the plain language of C.R.C.P. 16.2(e)(10) does not allow a district
court to redetermine child support); see also In re Marriage of
Dadiotis, 2014 COA 28, ¶ 8 (the plain language of C.R.C.P.
16.2(e)(10) does not allow a district court to redetermine
maintenance).
¶ 10
That said, husband contends only that the district court erred
in granting wife relief under C.R.C.P. 60(b)(2). Specifically, he
asserts that she knew about his work for Pono, decided to forgo
formal discovery, and made a “calculated decision to settle the
case.” We are not persuaded.
6
¶ 11
Relief from a judgment or order is available under C.R.C.P.
60(b)(2) for fraud, misrepresentation, or other misconduct by an
adverse party. Roddy, ¶ 21.
¶ 12
Granting relief pursuant to C.R.C.P. 60(b)(2) lies within a
district court’s sound discretion. Roddy, ¶ 23. The court abuses its
discretion when its decision is manifestly arbitrary, unreasonable,
or unfair, or if it misapplies the law. In re Marriage of Young, 2021
COA 96, ¶ 7.
¶ 13
During the first hearing, husband testified that
he had been working for Pono since late 2017;
he did not disclose to wife or the vocational evaluator the
written engagement agreement, retaining him as counsel
for Pono;
he did not disclose documents from July 2018 to April
2019, which showed the nature and extent of his work
for Pono, including communications on numerous CBD
transactions;
Pono would not pay him until it became an actual
venture, describing his work as a “red herring” because it
would never “lead[] to anything”;
7
he did not provide wife with his 2019 tax returns;
he had experience in family law and was aware of the
disclosure requirements in C.R.C.P. 16.2; and
wife relied on his statements that he was not receiving
income from Pono.
¶ 14
The district court admitted into evidence Exhibit 13, which
consisted of sixteen “payment spreadsheets” drafted and signed by
husband. One in particular reflected that from July 2018 through
April 2019, husband had “charged” Pono $9,000 per month and
that the company had “paid” him the approximate sum of $100,000
from December 2017 through April 2019. Husband explained that
the exhibit was merely “demonstrative” and created for the limited
purpose of showing two possible investors in Pono about how
“billing would work.” As a result, he believed that he had no
obligation to disclose that information to wife prior to her signing
the separation agreement.
¶ 15
For her part, wife testified that she relied on husband’s
assurances, as an officer of the court, that he was not receiving any
income from Pono. She further testified that had she seen the
undisclosed documents, she would not have agreed to husband’s
8
income of $4,500 when determining maintenance and child
support.
¶ 16
In the end, the district court sided with wife. The court
determined that it was “undisputed” that husband failed to disclose
material documents related to his work for Pono. It also determined
that his explanation concerning his “payment spreadsheets” was
not credible and made no “logical sense.”
¶ 17
Husband’s contention requires us to second-guess the district
court’s resolution of conflicting evidence that turned on credibility
determinations, which we will not do. See In re Marriage of Kann,
2017 COA 94, ¶ 36 (“[O]ur supreme court has . . . expressed
unbridled confidence in [district] courts to weigh conflicting
evidence.”); see also In re Marriage of Farr, 228 P.3d 267, 270 (Colo.
App. 2010) (determining witness credibility is the province of the
district court); In re Marriage of Yates, 148 P.3d 304, 308 (Colo.
App. 2006) (the weight, probative force, and sufficiency of the
evidence, and the inferences and conclusions to be drawn
therefrom, are matters within the sole discretion of the district
court). On the same basis, we are not persuaded by husband’s
insistence that his business and personal accounts and federal tax
9
returns prove that he had not received any income from Pono. See
Kann, ¶ 36; see also Farr, 228 P.3d at 270; Yates, 148 P.3d at 308.
¶ 18
Because the record amply supports the district court’s
findings, and given that they are based on credibility
determinations, we discern no abuse of its sound discretion in
granting wife C.R.C.P. 60(b)(2) relief. See Roddy, ¶ 23.
III. June 24 Order
A. Maintenance
¶ 19
Next, husband contends that the district court erred in
denying his maintenance request because it did not follow the
statutory framework under section 14-10-114, C.R.S. 2021. We
agree.
¶ 20
We review de novo whether the district court correctly applied
section 14-10-114 in determining maintenance. See In re Marriage
of Vittetoe, 2016 COA 71, ¶¶ 3-4.
¶ 21
Under section 14-10-114(3)(a)(I), a district court awarding
maintenance shall make initial oral or written findings concerning
each party’s income, the marital property apportioned to each, their
financial resources, the reasonable financial needs as established
during the marriage, and whether the maintenance award would be
10
deductible by the payor and taxable to the recipient for federal
income tax purposes. See In re Marriage of Wright, 2020 COA 11, ¶
14 (the word “shall” in a statute is mandatory) (citation omitted);
see also Vittetoe, ¶ 9 (“The statute requires the district court to
make initial written or oral findings concerning four factors.”).
¶ 22
If, as here, the parties’ combined annual adjusted gross
incomes exceed $240,000, the formulas in section 14-10-114(3)(b)(I)
for determining the advisory guideline amount of maintenance do
not apply and the district court instead determines maintenance
based on factors listed in section 14-10-114(3)(c). See § 14-10-
114(3.5).
¶ 23
Finally, the district court must consider whether the
requesting party qualifies for maintenance:
After considering the provisions of this section
and making the required findings of fact, the
[district] court shall award maintenance only if
it finds that the spouse seeking maintenance
lacks sufficient property, including marital
property apportioned to him or her, to provide
for his or her reasonable needs and is unable
to support himself or herself through
appropriate employment.
§ 14-10-114(3)(d); see Wright, ¶ 16.
11
¶ 24
In denying husband’s maintenance request, the district court
explained:
[His] previously-undisclosed documents
demonstrate that he earned (or was capable of
earning) an additional $9,000 per month above
his actual reported, earned income of $4,333
per month which he claimed in 2019. Given
the undisclosed documents, the [c]ourt finds
that the maintenance award to [h]usband was
inflated based on that lack of information.
Husband’s income, according to those
documents, was $13,333 per month. Given
that, the [c]ourt does not find that [h]usband
can show that he would have been entitled to
maintenance, in that he could not meet his
reasonable needs or that he was unable to
support himself through appropriate
employment.
¶ 25
The district court mistakenly referenced subsection three of
the previous version of the maintenance statute in saying that it
“must first make a threshold determination that the spouse seeking
maintenance lacks sufficient property, including marital property,
to provide for [his] reasonable needs and that [he] is unable to
support himself . . . through appropriate employment.” See Ch.
151, sec. 1, § 14-10-114(3), 2001 Colo. Sess. Laws 483; see also In
re Marriage of Huff, 834 P.2d 244, 252 (Colo. 1992) (under the
previous version of the maintenance statute, the district court must
12
make a threshold finding that maintenance is necessary before any
further statutory consideration). But, under the current statute, it
is only after “making the required findings” that the court considers
what was formerly known as the “threshold” test. § 14-10-
114(3)(a)(I)(A)-(C), (II)(A)-(C), (3)(b)-(d); see Wright, ¶ 16; Vittetoe, ¶ 9.
¶ 26
Moreover, the district court did not make all of the necessary
findings under section 14-10-114(3)(a)(I), and there is no indication
that it considered the factors in section 14-10-114(3)(c). Nor did it
consider, at the end of its analysis, the “threshold” test for
maintenance pursuant to section 14-10-114(3)(d). See Wright, ¶ 16.
¶ 27
As a result, we reverse the district court’s maintenance
determination and remand the case with directions to follow the
procedure in the current version of section 14-10-114, making
findings where required and addressing the factors pertinent to its
maintenance determination. See Wright, ¶ 23. In doing so, the
court must enter sufficient factual findings to enable appellate
review. See In re Marriage of Rozzi, 190 P.3d 815, 822 (Colo. App.
2008) (“A [district] court’s order must contain findings of fact and
conclusions of law sufficiently explicit to give an appellate court a
clear understanding of the basis of its order and to enable the
13
appellate court to determine the grounds upon which it rendered its
decision.”); see also In re Marriage of Wormell, 697 P.2d 812, 815
(Colo. App. 1985) (requiring district court to make certain specific
findings under section 14-10-114 to apprise the parties of the
reasons for its decision and to preserve its rationale for any
appellate review).
¶ 28
Because maintenance is based on the parties’ financial
circumstances at the time the order is entered, the district court
should consider the parties’ current circumstances on remand. See
Wright, ¶ 14; see also Kann, ¶ 79 (“[B]ecause maintenance awards
are based on the parties’ financial situations when such orders are
entered, the [district] court may take additional evidence of changed
financial circumstances as it deems appropriate.”). For that reason,
we need not consider husband’s argument that the court
improperly calculated his income. See Wright, ¶ 24.
B. Attorney Fees and Costs in District Court
¶ 29
Last, husband contends that the district court lacked the
authority to award wife attorney fees and costs under C.R.C.P.
60(b)(2). We disagree.
14
¶ 30
At the outset, we reject wife’s claim that husband did not
preserve this issue for our review. Husband was not required to
object to the district court’s findings to preserve his challenge to the
order on appeal. See C.R.C.P. 52; see also People in Interest of D.B.,
2017 COA 139, ¶ 30.
¶ 31
In a dissolution proceeding, the parties owe each other, and
the court, a duty of full and honest disclosure, and they must
provide all information material to the resolution of the case.
C.R.C.P. 16.2(e)(1). If a party fails to comply with her or his
obligation, “the court may impose appropriate sanctions,” including
an award of reasonable attorney fees and costs. C.R.C.P. 16.2(j);
see In re Marriage of Cardona, 321 P.3d 518, 527 (Colo. App. 2010),
aff’d on other grounds, 2014 CO 3. Such a sanction is not limited
to those situations in which the violation of the disclosure
obligation provides a basis for relief under C.R.C.P. 16.2(e)(10).
Absent an abuse of discretion, we will not disturb the district
court’s decision in such matters. See id.
¶ 32
In moving to set aside the maintenance and child support
provisions of the separation agreement, wife requested her attorney
fees and costs under C.R.C.P. 16.2. After the first hearing, the
15
district court found that husband had failed to comply with
C.R.C.P. 16.2 and reserved ruling on her request for fees and costs
until after the second hearing. Following that hearing, the court
found that an “award of attorney fees and costs [was] an
appropriate consequence for [h]usband’s failure to properly disclose
information regarding his income at the time of the permanent
orders process.” The court added, “[H]e was well aware of the
requirements of disclosures under Rule 16.2 at the time and yet he
failed to provide such information.”
¶ 33
So, contrary to husband’s contention, fees and costs were not
awarded under C.R.C.P. 60(b)(2). And because the district court’s
decision to sanction husband was supported by the record, we
discern no abuse of discretion in this regard. See Cardona, 321
P.3d at 527.
IV. Appellate Attorney Fees
¶ 34
Wife asks for her appellate attorney fees under section 13-17-
102, C.R.S. 2021, arguing that husband’s appeal lacked substantial
justification. In light of our disposition, we deny her request.
¶ 35
Husband requests his appellate attorney fees under section
14-10-119, C.R.S. 2021, due to the disparity in the parties’
16
financial resources. See In re Marriage of Gutfreund, 148 P.3d 136,
141 (Colo. 2006). We direct the district court on remand to consider
this request because it is better equipped to ascertain the parties’
financial resources. See C.A.R. 39.1; In re Marriage of Alvis, 2019
COA 97, ¶ 30.
V. Conclusion
¶ 36
The March 10 order is affirmed.
¶ 37
The portion of the June 24 order regarding maintenance is
reversed, and the case is remanded for further proceedings in
accordance with the views expressed here. The court on remand
must also consider husband’s request for appellate attorney fees
under section 14-10-119. Otherwise, the rest of the order is
affirmed.
JUDGE SCHUTZ and JUDGE GRAHAM concur.
