No. 96CA0780Colorado Court of Appeals.
July 10, 1997 Petition for Rehearing DENIED August 28, 1997 Petition for Writ of Certiorari DENIED February 23, 1998
Appeal from the District Court of Boulder County, Honorable Joseph J. Bellipanni, Judge, No. 89DR104
ORDER AFFIRMED IN PART, REVERSED IN PART, AND CAUSE REMANDED WITH DIRECTIONS
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Cox, Mustain-Wood, Walker Schumacher, LLC, Timothy B. Walker, Littleton, Colorado, for Appellee.
Conrad T. Swanson, Pro Se.
Day Sackheim, Daryl K. James, Boulder, Colorado, for Appellant (On the Briefs).
Christine A. Coates, Boulder, Colorado, Guardian-Ad-Litem.
Division II
Criswell and Marquez, JJ., concur
Opinion by JUDGE TAUBMAN
[1] Conrad T. Swanson (husband) appeals from an order of the trial court increasing his child support obligation and ordering him to pay attorney fees to Janet A. Bregar (wife). We affirm in part, reverse in part, and remand for further proceedings. [2] As part of the decree of dissolution entered in 1989, husband agreed to pay child support in the amount of $800 per month and was awarded the tax exemptions for both children. In January 1995, wife moved for an increase in child support and husband responded that there should be a decrease. [3] In 1992, husband, an attorney, was fired from the law firm in which he had been working at the time of the dissolution. He had been earning $4,250 per month there. He then earned approximately $27,000 from a solo practice in 1993. At the time of the hearing in this matter, he had been employed with a law firm since January 1994 but testified that he had not earned any money and was indebted to the firm for over $10,000. He testified that he did not foresee any income from his work as a lawyer because he had been unsuccessful in obtaining alternative legal employment. [4] Husband also testified that he had started a cattle ranch in April 1994 because he had wanted to raise cattle since childhood. However, he testified that he had not earned anyPage 785
money from this financially unsuccessful endeavor.
[5] Additionally, husband received proceeds from the sale of stock between 1993 and 1995 totaling over $320,000, almost all of which was taxed as a capital gain. [6] Husband’s capital gains resulted from the sale of shares of stock he had received as part of the permanent orders. Because the basis of those shares of stock was negligible, the parties recognized at the time of permanent orders that nearly all the proceeds from any later sale of this stock would be taxed as capital gains. Consequently, as part of permanent orders, husband was awarded additional shares of stock equal to 16.5% of the marital debt so that the parties would share equally in the anticipated tax burden when husband sold the shares of stock to pay the marital debt. [7] After a two-day evidentiary hearing, the magistrate determined that husband was voluntarily underemployed and, in addition to his undisputed monthly income of $1,309, imputed to him $4,250 per month as potential earnings as a lawyer and $1,500 per month as a reasonable return on the total proceeds from the sale of stock. Child support was significantly increased. In addition, wife was awarded $11,000 in attorney fees. On review, the trial court made minor corrections and, otherwise, affirmed. [8] Initially, we note that although wife argued before the trial court that the entire amount of husband’s proceeds from the sale of stock should be characterized as income based on §14-10-115(7)(a)(I)(A), C.R.S. (1996 Cum. Supp.), the trial court ruled otherwise, and she has not appealed from that ruling. I.
[9] Husband first contends that the trial court erred in determining that he was voluntarily underemployed. We disagree.
(Colo.App. 1994). [11] Factual findings of the trial court will not be disturbed on appeal unless clearly erroneous and not supported by the record. In re Marriage of Udis, 780 P.2d 499 (Colo. 1989). Further, the determination of the credibility of witnesses and 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 trial court. In re Marriage of Foottit, 903 P.2d 1209 (Colo.App. 1995).
A.
[12] Husband argues that there cannot be a finding of voluntary underemployment because alternative employment was not available to him. We disagree.
(Colo.App. 1995). Further, § 14-10-115(7)(b)(I) merely requires the court to determine potential income, and imposes no burden on one parent to prove that an available job exists for the other parent. [14] We reject father’s argument that In re Marriage of Campbell, supra, required wife to prove that a particular job is available. See In re Marriage of Mackey, ___ P.2d ___ (Colo.App. No. 96CA1029, June 12, 1997). [15] Here, in concluding that husband was voluntarily underemployed, the magistrate implicitly determined that husband’s efforts in starting a cattle raising operation were not reasonable. See In re Marriage of Foottit, supra. Further, the magistrate implicitly determined that husband’s testimony concerning his efforts to obtain legal employment was not credible. Finally, although wife did not present evidence of the existence of available jobs, the evidence and reasonable
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inferences from it support the magistrate’s determination that husband was voluntarily underemployed, and thus, the trial court did not abuse its discretion in affirming the magistrate’s order.
B.
[16] Husband also argues that since his employment as a cattle rancher was a good faith career choice, was not intended to reduce the support available to his children, and did not unreasonably reduce support, he fits within the exceptions set forth in § 14-10-115(7)(b)(III)(B), C.R.S. (1996 Cum. Supp.). We disagree.
C.
[18] Husband also argues that the trial court’s imputation of $4,250 monthly income from potential earnings as a lawyer is without any support in the record. We disagree.
II.
[20] Husband also asserts that the trial court erred in imputing investment income to him from the proceeds from the sale of stock he had received in 1993, 1994, and 1995. We agree in part and remand the cause for further proceedings.
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he used, imputed $1,500 monthly income to husband.
[25] The district court altered the magistrate’s factual findings to reflect gross capital gains of $322,000. It also determined that the magistrate had erred in subtracting capital gain taxes before imputing income to husband. However, the trial court ultimately determined that the magistrate’s imputation of $1,500 interest income per month was not erroneous because, if taxes were not deducted from the $322,000 gain, the rate of return would be only 5.75% per year. [26] On appeal, the district court’s calculation of $322,000 in capital gains is not disputed. The record reveals that husband paid approximately $40,000 in federal capital gains taxes in 1994 and $37,000 in 1995. However, although husband testified that he had paid federal capital gains taxes in 1993 and state taxes on his capital gains in 1993, 1994, and 1995, the record does not reveal the amounts of such payments. [27] After the dissolution became final, husband incurred additional margin debt to finance his ranching operation, to pay for living expenses, and to pay child support and maintenance. At various times, to reduce his margin debt, husband sold shares of his stock, which generated the capital gains at issue here. [28] Initially, we agree with the trial court that, under the circumstances presented here, it was appropriate to consider husband’s sales proceeds as an asset which could reasonably be expected to generate income, even though some portion of his sales proceeds had been consumed prior to the support determination. See In re Marriage of Laughlin, supra. [29] Next, we conclude that, in determining the amount of income which the sales proceeds could reasonably be expected to generate, the district court erred in failing to deduct the payment of capital gains taxes. In particular, the court should have calculated the reasonably expected income from each year’s sales proceeds from the time husband received them until he actually paid taxes on his capital gains. It then should have calculated the reasonably expected income on the amounts remaining after the date of each tax payment. [30] This conclusion is supported by In re Marriage of Armstrong, supra. In that case, husband used an inheritance to reduce his monthly debts and increase his disposable income. A division of this court held that the inheritance was an asset which could generate income and, accordingly, considered it in determining a monthly imputed income for calculating child support. However, amounts required to be paid out by him as a condition to his receipt of the inheritance were deducted from husband’s inheritance for purposes of computing the amount of interest income his inheritance reasonably could be expected to generate. [31] The same reasoning applies to taxes required to be paid when capital gains are realized because the amounts paid as taxes cannot reasonably be expected to generate any income. [32] We reject husband’s contention that the amounts he paid to reduce his margin debt should similarly be deducted from the amount of his sales proceeds because such margin debt payments were mandatory. Husband did not incur margin debt in order to purchase additional shares of stock and, in turn, generate additional capital gains. Rather, as noted, he incurred additional margin debt after the dissolution in order to obtain funds for his ranching operation, for living expenses, and to pay child support and maintenance. Thus, the amount of sales proceeds husband used to pay margin debt was a discretionary expense and was correctly included in determining his imputed income. See In re Marriage of Armstrong, supra. [33] Accordingly, the cause must be remanded to the district court for recalculation of husband’s imputed investment income from his sales proceeds, taking into consideration the taxes actually paid by him on such proceeds. On remand, the trial court should determine a reasonable rate of return to calculate the imputed income from husband’s sales proceeds reduced by the amount of taxes actually paid on his receipt of those proceeds. See In re Marriage of Armstrong, supra. III.
[34] Husband also asserts that, because the evidence did not establish that his financial
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circumstances were better than wife’s, the trial court abused its discretion in ordering that he pay $11,000 in attorney fees, approximately half of the amount requested by wife. We disagree.
[35] Under § 14-10-119, C.R.S. (1987 Repl. Vol. 6B), the trial court has broad discretion in awarding attorney fees after considering the financial resources of the parties. In re Marriage of Oberg, 900 P.2d 1267 (Colo.App. 1994). Attorney fees are to be awarded primarily to equalize the financial positions of the parties. In re Marriage of Trout, 897 P.2d 838(Colo.App. 1994). [36] Here, the record supports the magistrate’s determination that husband’s income was approximately twice that of wife’s, that his financial resources were vastly larger than wife’s, and that this was a highly contested case. Thus, we agree with the trial court that the magistrate’s award of fees did not constitute an abuse of discretion. [37] The portion of the order awarding attorney fees is affirmed. The portion of the order modifying child support is reversed, and the cause is remanded for further proceedings consistent with this opinion. [38] JUDGE CRISWELL and JUDGE MARQUEZ concur.