Marriage of McCarthy

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

property division. See In re Marriage of Roddy, 2014 COA 96, ¶ 17

(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.