By: Curtis Wiberg
In prior blog posts, we have discussed the duty of financial disclosures in a divorce. Under Colorado Rule of Civil Procedure 16.2 (e), Colorado law not only requires an absolute duty to disclose one’s financial situation, but also how a failure to accurately disclose, whether by non-disclosure or misstated disclosure, allows a court to re-allocate the assets of a marital estate within the 5 years subsequent to the final Decree of Dissolution, once a material omission of disclosure is shown.
The Colorado Court of Appeals has since, recently, taken that a step further. Whereas a spouse, presumably before, had to come to court with proof or knowledge that the other spouse materially misrepresented or omitted disclosure of a material asset, now the Court of Appeals lowers significantly the threshold upon which a spouse can re-open litigation over the division of a marital estate.
In Marriage of Durie, 2017 CA 1295, the court permitted a spouse to reopen a case under C.R.C.P 16.2 (e) based upon “information and belief” that a material omission or misstatement of disclosure occurred, and that by meeting a showing beyond just vague “suspicions and speculations,” that party could additionally seek “discovery” (a procedure authorized by court rule to allow one party to obtain information and documentation from the other party) to attempt to demonstrate that the other party failed in its obligation to provide accurate information.
Specifically, in Durie, a husband and wife hired a joint expert to value husband’s business. As part of that process, husband provided information to the expert for the expert to make that valuation. Ultimately, the expert valued the business at approximately $855,000. A subsequent expert hired by wife valued the business at $920,000. The parties ultimately entered into a Separation Agreement dividing the marital estate with a stipulated value of the business at $878,579
However, less than a year later, husband was able to sell just a portion of the business for $6,900,000, over 850% of what the joint expert valued the business. Furthermore, wife had information that husband may have been negotiating this sale while the divorce and the expert valuation was in process.
The crux of the Durie case was the level of information wife came to court with, arguing to the court that husband had failed in his duty to disclose. Wife’s motion to the court contained allegations based “upon information and belief” that husband had failed in his duty to accurately disclose material information that would impact on the valuation of the business and pointing to the ultimate sale of part of the business for much more than the joint valuation. Husband countered that the existence of an independent joint expert valuation absolved him from any motion alleging he breached his duty of disclosure.
The Court of Appeals disagreed with Husband. The court noted that Rule 16.2 places a duty on both spouses to disclose “all information that is material to the resolution of the case without awaiting inquiry from the other party.” The court further highlighted that a non-disclosing spouse does not even have to intend to deceive the other spouse, and that all that matters is that a non-disclosure or misstatement of assets occurred, without regard to the offending spouse’s intent.
Accordingly, then, “a moving party may make allegations [to re-open a division of a marital estate] based on information and belief… because he or she may not have complete information about the circumstances of an alleged misstatement or omission.” Additionally, upon meeting a showing of credible “information and belief” the party asserting that a non-disclosure occurred will be allowed to engage in the process of “discovery” as to that alleged non-disclosure so as to develop that information for the ultimate determination by a court as to whether a redistribution of the marital property is appropriate.
What the Durie case, and the cases preceding it interpreting C.R.C.P. Rule 16.2 obligating each spouse to make full and complete financial disclosure, is make clear is that a court will not allow a spouse to make an unfair windfall to the detriment of the other spouse. A court will uphold a fair division of a marital estate, while the standard to unsettle a property division agreement or order is now lowered.