Security for Payment Ensures Compliance
President Reagan once said about the Soviet missile program “trust by verify.” And in a wide variety of transactions you may see performance bonds, payment bonds, performance liens, security interests, etc. They ensure all are different measures to ensure security for payment.
In Colorado family law cases, the same principle also applies. While courts assume that the spouses in a divorce will follow the rules and disclose assets, and pay their ordered obligations, the law therefore recognizes that in some cases, you cannot rely upon a spouse to do the right thing, and security for the payment may be needed to ensure compliance.
Colorado’s Uniform Dissolution of Marriage Act authorizes a court to require a party put up security for payment to ensure compliance with its orders:
“the court has the power to require security to be given to insure enforcement of its orders.”
But this discretion is not unfettered. The Colorado Court of Appeals recently reversed a trial court’s imposition of a security against a father to enforce his property equalization payment. In Evans, the same father had previously been found in contempt for non-payment, and now, the only reason why the husband even had to pay the wife was because the court reopened the property division years after the divorce because the husband failed to disclose his 100% ownership interest in a business.
So it’s safe to say that this guy’s history did not exactly impress the court. However, that does not mean a trial court can take shortcuts and impose a security for payment without complying with the law. As a result of his concealing the asset, the trial court ordered the husband to pay the wife almost $1.2m, at the rate of a minimum of $50,000/mo until paid, and imposed a lien against all of the husband’s assets until compliance.
Security for Payment Can Be Ordered Without Request of Spouse
In Evans, the wife apparently did not file a motion asking the court to order security payment, and the husband’s appeal suggested this should bar the court from ordering one. The Court of Appeals rejected that argument:
“We reject husband’s apparent argument that a court can only order security on motion of a party, which did not occur here. Nothing in section 14-10-118 requires such a motion.”Evans, at ¶ 71.
Security Must Be Reasonable & Supported by Findings
However, while the husband lost on that part of his argument, the court of appeals did find the performance security was improperly ordered. Applying a prior decision, Jaeger, the Court of Appeals held that there are two preconditions for requiring a security for payment:
- “Amounts of security must be reasonable both in amount and duration”, as a security greatly in excess of the amount owed is confiscatory.
- “The court should make factual findings as to the amount and duration reasonably necessary to ensure payment of the obligations.”
Evans, at ¶ 68.
Because the trial court failed to make any findings as to why the order for security for payment was necessary, nor why it was reasonable to impose a lien against all of the husband’s assets. As a result, the order for the performance security was reversed and remanded:
“We therefore reverse the order for security and remand for explicit factual findings. Any new order must be reasonable in both amount and duration, and must relate to all the husband’s financial obligations to wife.”Evans, at ¶ 70.
Note – this same husband was previously in contempt for non-payment, and in the present case, the whole reason the trial court even had to order payment was because the husband had failed to disclose his 100% ownership in a business during the original divorce. It seems likely that the trial court will consider the husband to be untrustworthy, and be able to make findings justifying the need for security for payment. So this was a temporary, and small, procedural victory for the husband, and does not imply he will ultimately win on remand.
However, given that the security for payment must be reasonable compared to the obligation owed, on remand the husband may well avoid the all-encompassing lien on all of his assets previously ordered, as that security may be beyond what is necessary to protect his obligation.
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