Can a spouse rescind a divorce settlement contract if it turns out that the valuation assigned to assets the spouse retained in exchange for a cash payment to the other was inflated due to fraud by a third party?
Several years ago, Husband, a prominent New York real estate attorney at a large firm, and Wife, entered into a contract as part of an uncontested divorce. In the negotiations, the two listed their marital assets, including several homes, and divided them roughly fifty-fifty.
The homes aside, it appeared that the couples’ total assets to split amounted to $13.2 million. The agreement apparently provided that Husband would retain these assets, in their extant form, in exchange for making a cash payment to Wife in the amount of $6.6 million.
It turns out, several years later, that the value of these other assets was overstated by $5.4 million. That portion of the assets are actually worth zero, because they were held in an investment account managed by Bernard Madoff, whose fund turned out to be a Ponzi scheme.
According to the New York Daily News, Husband seeks rescission and reformation of that part of the contract, along with restitution from Wife in the amount of $2.7 million (half the amount of the original valuation of that account). Can he? What grounds are available to do so?