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In re Marriage of Durie

Court of Appeals of Colorado, First Division

September 20, 2018

In re the Marriage of Steven R. Durie, Appellee, and Kelly J. Durie, n/k/a Kelly J. Simmerman, Appellant.

          Douglas County District Court No. 14DR30238 Honorable Michael Spear, Judge

          Announced September 20, 2018 Epstein Patierno, LLP, Steven B. Epstein, Wendy J. Smock, Denver, Colorado, for Appellee

          Stevens, Littman, Biddison, Tharp & Weinberg, LLC, Craig A. Weinberg, Boulder, Colorado, for Appellant



         ¶ 1 What happens when a spouse in a post-dissolution of marriage proceeding believes that the other spouse failed to disclose facts that materially impacted the valuation of a significant marital asset - their business - during negotiations for their separation agreement before the entry of the decree? C.R.C.P. 16.2(e)(10) provides a mechanism for that spouse to seek to reopen the division of marital property if the other spouse made misstatements or omissions concerning material assets. However, the rule does not address whether such a motion may be countered with a motion to dismiss, whether the moving party may make allegations based on information and belief, or whether the moving party is entitled to undertake limited discovery in support of his or her motion.

         ¶ 2 In this case, we follow the division's opinion in In re Marriage of Runge, 2018 COA 23M, 415 P.3d 884, concluding that filing a motion to dismiss under C.R.C.P. 12(b)(5) is not proper. We also conclude, as matters of first impression, that a moving party may make allegations on information and belief and that such party may be permitted to undertake discovery to support his or her motion.

         I. Overview

         ¶ 3 In this post-dissolution of marriage proceeding between Steven R. Durie (husband) and Kelly J. Durie (wife), now known as Kelly J. Simmerman, wife appeals the district court's order dismissing her motion to reopen the property division.

         ¶ 4 About three years after the district court entered a decree incorporating a separation agreement dividing the parties' marital property, wife moved under Rule 16.2(e)(10) to reallocate proceeds from husband's post-decree sale of business assets. In response, husband filed a motion to dismiss wife's motion, which the district court granted. Wife appealed.

         ¶ 5 Both parties initially focused their arguments on whether the district court properly applied Rule 12(b)(5) and the "plausibility" standard set forth in Warne v. Hall, 2016 CO 50, 373 P.3d 588. After the parties submitted their briefs but before oral argument, a division of this court decided Runge, holding that Rule 12(b)(5) and the Warne plausibility standard do not apply to a Rule 16.2(e)(10) motion.

         ¶ 6 Therefore, we asked the parties to address this holding of Runge during oral argument, as well as whether wife could allege facts on information and belief in her motion and whether she was entitled to conduct discovery on her motion. Wife's counsel asserted at oral argument (1) that he did not agree with the Runge division's holding and (2) that C.R.C.P. 7(b)(1) provided an appropriate standard for determining whether to allow a party to proceed on a motion under Rule 16.2(e)(10) by requiring that such a motion "state with particularity the grounds therefor, and . . . set forth the relief or order sought." For his part, husband's counsel agreed with the Runge division's holding, but also argued that Rule 16.2(e)(10) is essentially an anti-fraud provision, and therefore a motion under that rule must comply with C.R.C.P. 9(b), which requires that in all pleadings "aver[ring] . . . fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Wife maintained that her motion set forth sufficient facts under any standard to warrant discovery, while husband urged us to affirm the district court's order under any of the asserted standards.

         ¶ 7 We now reverse the district court's order and remand with directions for further proceedings.

         II. Background

         ¶ 8 Husband filed for divorce in April 2014. At the parties' request, the district court incorporated a separation agreement dividing the marital estate in a decree of dissolution issued in September 2014. Under the separation agreement, husband received the parties' business interests with an equalization payment due to wife for half of the value. In the separation agreement, the parties agreed that the total business assets were valued at $878, 589. A joint appraisal expert had valued the business assets at $855, 000 investment value and $770, 000 fair market value as of August 2014. Additionally, wife hired an independent expert, who valued the business assets at just under $920, 000.

         ¶ 9 In 2017, wife moved under Rule 16.2(e)(10) and under a similarly worded provision of the separation agreement to set aside or reopen the property division and reallocate the proceeds from husband's post-decree sale of a portion of the business interests.

         ¶ 10 Wife alleged in her motion that husband had failed to disclose facts that materially impacted the value of the parties' business assets. Specifically, she alleged that in October 2015 - just over a year after the decree was entered - husband sold a portion of the business interests that were allocated to him under the separation agreement to a Tennessee company for $6, 900, 000, over 850% more than the parties' joint expert had valued the total business interests.

         ¶ 11 She further alleged, on information and belief, that husband had traveled to Tennessee in May 2014 and had "engaged in negotiations to sell a portion of the business" interests prior to the parties entering into the separation agreement. Wife claimed that,

[u]pon information and belief, Husband had been in negotiations with [the Tennessee purchaser] involving a deal or potential deal to sell [the business or a portion thereof] prior to the time that the joint expert had performed his valuation. Upon information and belief, Husband failed to disclose and intentionally concealed material facts that impacted the value of the parties' business and the valuation performed by [the expert] and/or failed to update the information to [the expert] or Wife once those negotiations commenced.

         ¶ 12 Husband moved to dismiss wife's motion, asserting that she had not alleged sufficient facts to trigger Rule 16.2(e)(10). Husband admitted that he had sold "some" of the business assets in October 2015 for $6, 900, 000 to a Tennessee purchaser. He further admitted that he had travelled to Tennessee in May 2014, but denied that the purpose of the trip was to engage in any negotiations. Nevertheless, husband argued that there was no basis to reopen the property division because the parties had retained a joint valuation expert to appraise their businesses before entering into the separation agreement.

         ¶ 13 Wife responded, arguing that, although husband had not set forth a standard for evaluating his motion, the court should treat it as one under Rule 12(b)(5). Thus, wife argued that Warne's plausibility standard applied. She asserted that she had stated plausible grounds for relief. She also requested attorney fees under section 13-17-102, C.R.S. 2017, or, alternatively, under section 14-10-119, C.R.S. 2017.

         ¶ 14 The district court applied the plausibility standard as articulated in Warne and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554-56 (2007), and held that wife's allegations were insufficient "to nudge her claim from conceivable to plausible." It therefore granted husband's motion to dismiss. The district court did not address wife's request for attorney fees.

         ¶ 15 We now consider wife's appeal in light of Runge and the ...

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