Background
During the parties’ marriage, Lawrence Kokoszka solely owned Webatix, Inc., which operated Insomniac Browser and Ghost Browser. In their 2021 dissolution agreement, they stipulated to a marital value of $809,264 for Webatix, awarded the business to husband, and waived maintenance and child support. Husband had provided the jointly retained valuation expert with draft financial documents and represented that his annual income was about $865,607.
While preparing the parties’ 2020 taxes, their accountant learned that husband had reported about $1.8 million in income, increasing wife’s tax liability. In discovery on wife’s child-support modification motion, she also learned that husband had sold Insomniac Browser for $3.5 million five months after the decree. The district court reopened the case under C.R.C.P. 16.2(e)(10), found husband had misrepresented and concealed material facts about Webatix, allocated wife about $1.1 million of its previously undisclosed value, and awarded her reopening-related fees and costs.
The Court’s Holding
The Colorado Court of Appeals affirmed. The record supported the district court’s findings that husband engaged in a sustained effort to portray Webatix and Insomniac Browser as essentially worthless, failed to disclose a potential buyer during settlement negotiations, and later sought to conceal the completed sale and its proceeds. Those misrepresentations and omissions materially affected wife’s understanding of the business’s value and warranted reopening under Rule 16.2(e)(10).
The court also held that the district court adequately considered the parties’ economic circumstances at the reopening hearing. Its findings concerning husband’s assets, income, transfers, debts, and lack of credibility supported the allocation to wife. Because reopening was proper, husband’s challenge to the fee award failed. The court denied wife’s request for appellate fees based on an allegedly unjustified appeal, but remanded for the district court to decide her request for appellate fees under section 14-10-119; appellate costs were taxed against husband.
Key Takeaways
- Divorcing parties must affirmatively disclose all material information, including facts bearing on a business’s viability and value.
- A post-decree business sale alone does not justify reopening, but concealment and material misrepresentations during settlement can.
- When reallocating a previously misstated asset, the court must consider the parties’ economic circumstances at the Rule 16.2(e)(10) hearing.
Why It Matters
The decision underscores that negotiated dissolution agreements remain subject to Rule 16.2’s heightened disclosure obligations. A party cannot rely on the finality of a settlement obtained after concealing information that materially undermines the other spouse’s valuation of a marital asset.