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Divorce Windfall Not Unconscionable

By Mark Faas

When Deborah and Rafael Etzion negotiated a separation agreement in 2003 after 24 years of marriage, an appraiser valued a Brooklyn warehouse they owned at $6.5 million. Under the terms of the separation agreement, Ms. Etzion received $13 million and her soon-to-be-ex-husband received the Williamsburg warehouse and the land underneath it, as well as the title to several corporations the couple owned. Two and one-half years later, Mr. Etzion sold the warehouse for $84.6 million, more than 13 times its appraised value. Ms. Etzion filed suit for rescission or reformation of their stipulation of settlement. In May, a Brooklyn appeals court threw out the majority of Ms. Etzion's claims. A unanimous appellate panel rejected her causes of action for unilateral mistake, mutual mistake, unconscionability and breach of fiduciary duty. “Although the defendant here received the warehouse property, which substantially increased in value after the date on which the parties entered into the memorandum agreement, 'courts will not set aside an agreement on the ground of unconscionability simply because it might have been improvident,'” the panel held in Etzion v. Etzion, 2008-00759.

The panel found that the defendant had a duty to disclose but not to volunteer information, which was available in the public domain and might affect the property's value. The court did allow three causes of action alleging fraud to go forward.

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