## Facts

- Steven Simkin and Laura Blank divorced and executed a negotiated marital settlement agreement dividing marital property.
- The marital estate included an investment account at Bernard L. Madoff Investment Securities held in Simkin’s name, which both parties treated as a real asset with the stated account value.
- Under the settlement, Blank received liquid assets (including a cash payment) calculated using the account’s stated value, effectively cashing out her interest.
- Simkin retained the Madoff account as his separate property after the settlement.
- After the settlement, Madoff’s business was revealed as a Ponzi scheme and the account was essentially worthless.
- Simkin sued seeking rescission or, alternatively, reformation of the settlement on the theory that both parties were mutually mistaken about the account’s value and legitimacy.
- The trial court dismissed the complaint; the Appellate Division affirmed; Simkin appealed to the New York Court of Appeals.

## Issues

1. Whether a divorce settlement may be rescinded or reformed for mutual mistake when an investment account allocated to one spouse later proves worthless due to a fraud discovered after the agreement.
2. Whether the alleged mistake concerned a present, basic fact going to the essence of the bargain, or instead reflected an assumed risk of later value change allocated by the settlement.

## Decision

- The New York Court of Appeals affirmed dismissal for failure to state a claim.
- The court held that Simkin did not plead a cognizable basis for rescission or reformation based on mutual mistake.
- The court characterized the allegations as a post-settlement loss in value of an asset Simkin retained, not a qualifying mutual mistake about a basic existing fact warranting extraordinary relief.
- The court concluded the settlement’s structure (cash to Blank; account to Simkin) placed the risk of the account’s later failure on Simkin.
- The court emphasized the strong policy favoring finality of negotiated matrimonial settlements and rejected reopening the bargain based on hindsight inequity.

## Legal Principles

- Rescission for mutual mistake requires a mistake shared by both parties at contracting about a basic assumption that goes to the essence of the agreement and concerns a then-existing fact, not a later change in value.
- Matrimonial settlement agreements are treated as contracts; courts are reluctant to set them aside absent a clear basis for contract or equitable relief.
- When a settlement allocates a potentially volatile or uncertain asset to one spouse and compensates the other with liquid assets, the allocation ordinarily assigns the risk of later depreciation or failure to the spouse retaining the asset.
- A perceived “windfall” arising from subsequent events does not, by itself, justify rescission or reformation of an otherwise valid settlement.

## Conclusion

The court refused to rescind or reform the divorce settlement after the Madoff account became worthless, holding that the agreement allocated the risk of the account’s later failure to the spouse who retained it and that mutual mistake doctrine did not permit reopening the property division on these allegations.


Simkin v. Blank, 19 N.Y.3d 46 (N.Y. 2012)