The Colorado Court of Appeals issued its opinion in In re Marriage of Corak on Thursday, October 23, 2014.
Marital Property—Marital Debt Allocations.
Husband and wife entered into a prenuptial agreement identifying separate property that each had acquired before the marriage. This separate property included a parcel of husband’s property (Shoshone property). The agreement stated that all separate property would remain as such.
Shortly after marrying, husband and wife jointly bought a piece of property (Pinyon property). Husband pledged the Shoshone property as collateral for a home equity line of credit for the down payment on the Pinyon property and the funds to remodel it. Husband and wife agreed to apply $16,000 from the credit line to retire one of wife’s premarital credit card debts. Husband and wife agreed that wife would make payments toward the line of credit.
Wife testified at the permanent orders hearing that she had made all of the payments on the credit line during the marriage, even beyond the amount she had used to retire her separate debt. She also testified that she had paid down some of her other premarital debts. Husband testified he paid down his separate debt during his marriage and admitted he had not disclosed the debt in the prenuptial agreement.
The district court ruled that husband’s act of pledging the Shoshone property as collateral for the line of credit turned a portion of it into marital property. The Court of Appeals found this to be an issue of first impression in Colorado. In looking to other jurisdictions, the Court found cases concluding that using separate property to secure a loan does not change the pledged property into marital property. The case was remanded for the trial court to determine the division of marital property and marital debt after setting aside all of the Shoshone property as husband’s separate property.
The Court agreed with husband that he had initially asked the trial court to restore the marital funds wife had spent to retire her separate premarital debt to the marital estate and credit them to her. However, after review of the record, the Court concluded that husband had intentionally abandoned this argument. Because the Court found husband had abandoned his claim to have these funds allocated differently, the Court will not disturb the trial court’s findings on appeal.