ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Tuesday, April 3, 2012

Breaking: NY Ct of Appeals Dismisses Husband's Claim in Maddoff Mutual Mistake Case

We've blogged a great deal about Simkin v. Blank and even live blogged the Valentine's Day oral argument.  Today the New York Court of Appeals unanimously reversed and dismissed the husband's case.  Judge Graffeo reasoned:

Even putting the language of the agreement aside, the core allegation underpinning husband's mutual mistake claim --that the Madoff account was "nonexistent" when the parties executed their settlement agreement in June 2006 -- does not amount to a "material" mistake of fact as required by our case law. The premise of husband's argument is that the parties mistakenly believed that they had an investment account withBernard Madoff when, in fact, no account ever existed. In husband's view, this case is no different from one in which parties are under a misimpression that they own a piece of real or personal property but later discover that they never obtained rightful ownership, such that a distribution would not have been possible at the time of the agreement. But that analogy is not apt here. Husband does not dispute that, until the Ponzi scheme began to unravel in late 2008 -- more than two years after the property division was completed -- it would have been possible for him to redeem all or part of the investment. In fact, the amended complaint contains an admission that husband was able to withdraw funds (the amount is undisclosed) from the account in 2006 to partially pay his distributive payment to wife. Given that the mutual mistake must have existed at the time the agreement was executed in 2006 (see Gould, 81 NY2d at 453), the fact that husband could no longer withdraw funds years later is not determinative.

This situation, however sympathetic, is more akin to a marital asset that unexpectedly loses value after dissolution of a marriage; the asset had value at the time of the settlement but the purported value did not remain consistent. Viewed from a different perspective, had the Madoff account or other asset retained by husband substantially increased in worth after the divorce, should wife be able to claim entitlement to a portion of the enhanced value? The answer is obviously no. Consequently, we find this case analogous to the Appellate Division precedents denying a spouse's attempt to reopen a settlement agreement basedon post-divorce changes in asset valuation.

Simkin v. Blank (NY April 3, 2012).

[Meredith R. Miller]

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