In re Marriage of Gibbs —

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.

SUMMARY
July 3, 2019

2019COA104

No. 18CA0250, In re Marriage of Gibbs — Family Law — Post-
dissolution — Modification and Termination of Provisions for
Maintenance, Support, and Property Disposition — Imputed
Income

This opinion answers the unresolved question of whether a

district court can, for the purpose of calculating maintenance,

impute to a party rental income from that party’s primary residence

when the primary residence has never been used as a rental

property. A division of the court of appeals concludes that a district

court cannot impute rental income to a party when that party has

never used the residence as an income-producing asset.
COLORADO COURT OF APPEALS 2019COA104

Court of Appeals No. 18CA0250
Larimer County District Court No. 12DR408
Honorable Devin R. Odell, Judge

In re the Marriage of

Carl Joseph Gibbs,

Appellant,

and

Joellen Elizabeth Gibbs,

Appellee.

ORDER AFFIRMED IN PART, REVERSED IN PART,
AND CASE REMANDED WITH DIRECTIONS

Division IV
Opinion by JUDGE LIPINSKY
J. Jones and Martinez*, JJ., concur

Announced July 3, 2019

Thomas & Associates Law Firm LLC, Joseph G. Williams, Greenwood Village,
Colorado, for Appellant

Alison Ruttenberg, Louisville, Colorado; Vigil Law Offices, P.C., Frank G. Vigil,
Lakewood, Colorado, for Appellee

*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2018.
¶1 Three years after the district court entered permanent orders

in his dissolution of marriage case, husband, Carl Joseph Gibbs,

sought to modify or terminate his maintenance obligation to wife,

Joellen Elizabeth Gibbs, under section 14-10-122(1)(a), C.R.S.

2018. Husband argued that his alleged loss of income resulting

from a shoulder injury he incurred three years following the entry of

the permanent orders constituted a substantial and continuing

change in his circumstances that warranted a decrease in his

maintenance payments.

¶2 The district court denied husband’s motion based on its

calculation of husband’s monthly income, including imputed rental

income from husband’s primary residence.

¶3 We affirm the portion of the decision addressing husband’s

self-employment income and reverse the portion imputing rental

income to him because husband never used the residence as an

income-producing asset. We remand to redetermine husband’s

maintenance obligation without considering imputed rental income.

I. Background

¶4 The parties’ marriage ended in 2013. In the permanent

orders, the district court awarded wife $1,850 in monthly

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maintenance until the death of either party, the remarriage or civil

union of wife, or further court order.

¶5 In September 2016, husband moved to modify or terminate his

maintenance obligation. He alleged that, as a result of a severe

shoulder injury, he was no longer able to perform labor-oriented

work. He further alleged that he had been diagnosed with stenosis,

which would require surgery and affect his ability to work for the

rest of his life.

¶6 Following a hearing at which husband, wife, and a physician

testified, the court found that husband had not shown a

substantial and continuing change in his circumstances and,

therefore, denied husband’s motion.

II. Husband’s Income

¶7 Husband contends that the district court abused its discretion

in determining that his income was $6,500 per month for purposes

of calculating maintenance.

A. Standard of Review

¶8 We review a district court’s order continuing or modifying

maintenance for an abuse of discretion. In re Marriage of Kann,

2017 COA 94, ¶ 75, ___ P.3d ___, ___. A district court abuses its

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discretion when its decision is manifestly arbitrary, unreasonable,

or unfair. In re Marriage of Gromicko, 2017 CO 1, ¶ 18, 387 P.3d

58, 61.

¶9 We defer to the district court’s factual findings unless they are

clearly erroneous. In re Marriage of Connerton, 260 P.3d 62, 66

(Colo. App. 2010). The district court must make sufficiently explicit

findings of fact to give the appellate court a clear understanding of

the basis of its order. In re Marriage of Rozzi, 190 P.3d 815, 822

(Colo. App. 2008).

B. Self-Employment Income

¶ 10 Husband argues that the district court miscalculated his self-

employment income because it did not accurately calculate the

ordinary and necessary business expenses that needed to be

deducted from his gross receipts, as required by section

14-10-114(8)(c)(III)(A), C.R.S. 2018. We disagree.

¶ 11 In applying the maintenance guidelines, an individual’s gross

income from self-employment is calculated by deducting from gross

receipts the ordinary and necessary expenses required to produce

income. Id. Ordinary and necessary expenses do not include

business expenses that the district court finds are “inappropriate

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for determining gross income.” § 14-10-114(8)(c)(III)(B). A self-

employed party’s gross income includes expense reimbursements

or in-kind payments received in the course of self-employment if

they are significant and reduce personal living expenses.

§ 14-10-114(8)(c)(I)(X).

¶ 12 The record reflects that, when the district court entered the

permanent orders, husband performed the manual labor of a

framer for his own construction company. As a result of husband’s

shoulder injury and pain from stenosis, he transitioned to a

supervisory position at his girlfriend’s construction company.

¶ 13 The court found that husband earned a $5,000 monthly salary

as a supervisor. The court acknowledged that husband was

required to use a portion of his salary to pay for certain business

expenses, including a cell phone, general liability insurance, and

auto insurance. However, the court found that these business

expenses were offset by his ability to use a company vehicle and the

cell phone for personal purposes.

¶ 14 The record supports the district court’s finding that husband’s

business expenses were offset by the value of the vehicle and cell

phone. Husband testified that his business expenses for his cell

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phone, general liability insurance, auto insurance, and loan

payment totaled $1,057 per month. He also testified that he was

provided the vehicle at no cost to himself and was allowed to use

the vehicle for personal use. Husband estimated that the monthly

loan payment on his vehicle was around $800 and that he spent

around $300 per month in fuel. Husband further said that his

construction company paid his cell phone bills. His monthly cell

phone bill was $123.

¶ 15 In finding that husband’s business expenses were offset by the

in-kind payments he received from his girlfriend’s construction

company, the court essentially added those payments to his salary,

see § 14-10-114(8)(c)(I)(X); see also In re Marriage of Long, 921 P.2d

67, 69 (Colo. App. 1996) (noting that in-kind payments might

include a company car, free housing, or reimbursed meals), and

then deducted his business expenses from his salary, see

§ 14-10-114(8)(c)(III)(A). Because his monthly business expenses

($1,057) were nearly the same as the monthly in-kind payments for

the vehicle, fuel, and cell phone ($1,223), we discern no abuse of

discretion in the district court’s calculation of husband’s self-

employment income.

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C. Imputed Rental Income

¶ 16 Husband argues that the district court erred in imputing

$1,500 per month in rental income to him. We agree.

¶ 17 The record reflects that husband continued living in the

marital residence following the dissolution of the parties’ marriage.

His monthly mortgage payment on the five-bedroom, 2,500-square-

foot home was $2,552 at the time of the modification hearing.

Husband lived in the home with his girlfriend and her three

children. They lived there together as a family. Husband testified

that he paid the mortgage and, although his girlfriend did not pay

rent, she paid for the utilities and groceries.

¶ 18 The district court found that this arrangement was not a fair

market exchange because husband’s portion of the utilities and

groceries was only a small fraction of these costs. In addition, the

district court imputed to husband rental income from the house,

noting that husband “owns a large house — the former marital

residence — that he could use to generate rental income. . . . [T]he

property . . . is much larger than he needs for himself.”

¶ 19 The district court “estimate[d] that fair rental value would be

at least $1,500 per month for a house of that size.” It therefore

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concluded that husband was “essentially receiving at least $1,500

in income that he is gifting to [his girlfriend] and her children.” The

district court found that “[t]he fact that [husband] chooses to forgo

this income from an asset should not be used to penalize [wife].”

The district court added the $1,500 in imputed rental income to

husband’s $5,000 monthly salary for a total income of $6,500 per

month.

¶ 20 For purposes of calculating maintenance, potential income is

properly imputed to a party who is voluntarily unemployed or

underemployed. See § 14-10-114(8)(c)(IV); see also People v.

Martinez, 70 P.3d 474, 476-81 (Colo. 2003) (discussing imputing

income to an unemployed or underemployed parent for purposes of

calculating child support). Unrealized income from an investment

asset that earns interest or distributes dividends is also properly

imputed to a party. See In re Marriage of Bregar, 952 P.2d 783,

786-87 (Colo. App. 1997) (interest imputed on portion of capital

gain from stock sale used to reduce margin account debt); In re

Marriage of Laughlin, 932 P.2d 858, 861-62 (Colo. App. 1997)

(interest imputed on portion of capital gain from sale of business

used to construct addition to home and to pay mortgages); In re

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Marriage of Tessmer, 903 P.2d 1194, 1196 (Colo. App. 1995)

(interest and dividends on a retirement account were income,

although not withdrawn and subject to penalty if withdrawn); In re

Marriage of Armstrong, 831 P.2d 501, 503-04 (Colo. App. 1992)

(income earned on portion of inheritance imputed to the father).

¶ 21 But no Colorado statute addresses whether potential rental

income can be imputed to a party for purposes of calculating

maintenance. Nor does any Colorado statute address whether

potential rental income from a party’s primary residence that has

never before earned rental income can be imputed to that party for

purposes of calculating maintenance. We answer this second, and

more narrow, question “no.”

¶ 22 No evidence in the record shows that the residence ever

produced income. There is also no evidence indicating that

husband was acting in bad faith by staying in the residence to

inflate his monthly expenses and avoid paying maintenance to wife.

By imputing rental income to husband, the court effectively

recharacterized husband’s home from a primary residence to an

income-producing rental property. This was, in our view, an abuse

of discretion.

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¶ 23 In In re Marriage of Mugge, 66 P.3d 207 (Colo. App. 2003), a

division of this court considered a parent’s unrealized income in the

form of an undistributed retirement account. Mugge held that it

was improper to “consider unrealized income for child support

purposes solely because a parent could liquidate an asset or change

its character into an asset capable of producing income.” Id. at

212. Like the father’s undistributed retirement account in Mugge,

husband’s primary residence in this case would not generate

income unless its character were changed. Id. Moreover, we are

unaware of any case holding, in effect, that a party in a dissolution

of marriage case may be compelled to relocate to a smaller

residence or to rent a portion of his or her home.

¶ 24 For these reasons, we conclude that, where a party has not

historically earned rental income from his or her primary residence,

potential rental income from that asset cannot be imputed to the

party for purposes of calculating maintenance. See id. at 213

(noting that several other statutory income categories expressly

require payment to the recipient).

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¶ 25 We therefore remand this case to the district court to

redetermine maintenance without imputing to husband potential

rental income from his primary residence.

III. Husband’s Argument that He Is Not Underemployed

¶ 26 We next turn to husband’s contention that the district court

erred in finding him underemployed.

¶ 27 The district court found that husband “has chosen a position

that is comfortable and familiar to him, but there is no evidence

that he has attempted to find the highest paying position possible

given his experience.” But the district court did not make findings

regarding the amount of additional income husband could be

earning. Thus, the district court did not impute any income to

husband on grounds of underemployment, and we need not

address husband’s argument on this point.

IV. Husband’s Other Arguments

¶ 28 Because the district court must redetermine maintenance

based on the parties’ circumstances at the time of that hearing, we

need not address husband’s arguments that he has experienced a

substantial decrease in his income warranting a modification of

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maintenance and that he would be impoverished if the district court

does not modify his maintenance obligation.

V. Conclusion

¶ 29 We affirm the portion of the district court’s order calculating

husband’s self-employment income, reverse the portion imputing

rental income to husband, and remand the case for redetermination

of maintenance, as provided herein.

JUDGE J. JONES and JUSTICE MARTINEZ concur.

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