| Matter of de Sanchez |
| 2008 NY Slip Op 10224 [57 AD3d 452] |
| December 30, 2008 |
| Appellate Division, First Department |
| In the Matter of Elizabeth L. de Sanchez, as Grantor. PedroArellano Lamar et al., Movants Appellants, and Eugenio J. Silva et al., Cross MovantsAppellants; JPMorgan Chase Bank, Respondent. |
—[*1] McCallion & Associates LLP, New York (Kenneth F. McCallion of counsel), for crossmovants appellants. Kelley Drye & Warren LLP, New York (Robert E. Crotty of counsel), forrespondent.
Order, Supreme Court, New York County (Carol R. Edmead, J.), entered January 7, 2008,which denied the motion and cross motion by descendants of the grantor of certain 1927 trusts tovacate judicial orders of settlement entered on February 26, 1953, August 30, 1974, andSeptember 11, 1975, unanimously affirmed, with costs.
In 1927, two years before the Great Depression, Elizabeth Laurent de Sanchez, whose familyowned a sugar plantation in Cuba, set up seven inter vivos trusts for the benefit of her sixchildren—Emilio (two trusts in his name), Jorge, Julio, Marcelo, Maria and Gabriela. In1953, following the grantor's death, the first intermediate accounts for these trusts were settledand approved by Supreme Court, New York County, for Hanover Bank, as successor in interestto Central Union Trust Company and predecessor in interest to JP Morgan Chase Bank. In 1974,the court settled the bank's second intermediate accounts for the Emilio trusts, and in 1975, thecourt approved the bank's second and final accounts for the Jorge and Marcelo trusts. Ahalf-century after the first accountings and more than 30 years after the second accountings,appellants—the grantor's grandchildren, great grandchildren and great greatgrandchildren—seek to vacate the judgments settling these accounts on the grounds thatthe bank engaged in constructive fraud against them, and the court never obtained personaljurisdiction over them.
Contrary to appellants' contentions, the motion court did not improperly raise the issue oftimeliness sua sponte; the bank actually argued in its 2005 memorandum of law that the motionswere untimely. Although the applicable standard of review is disputed, under eitherstandard—[*2]CPLR 317 or 5015—the motionswere untimely. Even had the motions been timely, the arguments asserted on appeal—lackof personal jurisdiction and "overwhelming evidence" of constructive fraud—would bewithout merit.
With respect to personal jurisdiction, it is well established that the affidavit of a processserver constitutes prima facie evidence of proper service. The mere denial of receipt of service is"insufficient to rebut the presumption of proper service created by a properly-executed affidavitof service" (De La Barrera v Handler, 290 AD2d 476, 477 [2002]). Appellants' affidavitscontained simply conclusory denials, and were thus insufficient to rebut the presumption ofproper service (see e.g. Ortiz v Santiago, 303 AD2d 1, 3-4 [2003]). In any event,appellants' interests were "virtually represented" by the grantor's eldest living survivor in eachline of descent (see CPLR 7703; SCPA 315). Her descendants, including the movantsand cross movants herein, are successor income and contingent remainder beneficiaries. Neitherthe grantor nor any of appellants had present interests in income. Therefore, there was no need toserve the movants and cross movants with process in the accounting, since the grantor's interestwas aligned with that of her progeny (see Matter of Schwartz, 71 Misc 2d 80 [1972]).
The remaining arguments with respect to personal jurisdiction are without merit. Crossmovants' contention that the grantor's estate was a necessary party in the 1952 proceeding, somany years after the judgment, does not require that it be set aside as to them (see Herskowitzv Friedlander, 224 AD2d 305, 306 [1996]). The petitions and orders to show causeadequately apprised the interested persons of the nature of the proceedings, and stated that thebank sought accountings for the trusts and to be relieved of any liability for its acts concerningthose trusts for the periods of the accounts.
A judgment or order may be vacated for "fraud, misrepresentation, or other misconduct of anadverse party" (CPLR 5015 [a] [3]). After the trusts were created in 1927, the goal of theinvestment fiduciary throughout the Great Depression and long thereafter was to preserve theprincipal while creating a reasonable income (see Matter of Carnell, 260 App Div 287,289 [1940], affd 284 NY 624 [1940]). "The rule in respect of the duty of a trustee is tokeep funds in a state of security, productive of interest and subject to future recall" (Matter ofFlint, 240 App Div 217, 226 [1934], affd 266 NY 607 [1935]). The trust investmentswere not for growth of assets for the grantor's grandchildren and great grandchildren, but ratherin accordance with her express direction that they be in securities that were "long term" and "taxexempt." Furthermore, extensive correspondence confirms that she and her family were keptapprised of the investments, and Emilio Sanchez confirmed that "all the changes during all theyears have been done with my approval and that of Mrs. Elizabeth Laurent de Sanchez."
With respect to mortgage participation, where there has been full disclosure followed byjudicial decree, postdecree objections on matters raised by the accounting cannot suffice to openthe decree (see Matter of Van Deusen, 24 Misc 2d 611, 616-617 [1960]). The recordshows that the bank communicated extensively with the beneficiaries as to mortgageparticipation and did not conceal anything. In addition, there was no self-dealing, as the bankmerely purchased the mortgage for the trust.
Finally, the bank did not misrepresent precedent concerning the rule against perpetuities tothe grantor, the beneficiaries, and the court in the 1974 proceeding concerning Jorge's andMarcelo's trusts, as there is a long-standing principle of interpretation that when there is analternative possible construction that would not violate the rule, the trust will not be invalidatedand a construction that does not violate the rule will be found to be the one the grantor intended(EPTL 9-1.3 [b]; see Schettler v Smith, 41 NY 328, 336 [1869]). In this case, theproblem arose because some of the grantor's children did not have issue of their own. It isunreasonable to argue that the grantor intended the trusts to be invalidated; in fact, theconstruction provided by the bank's counsel was clearly communicated to counsel for all parties,and no objections were raised.
We have considered appellants' remaining arguments and find them unavailing.Concur—Tom, J.P., Friedman, Gonzalez, McGuire and Acosta, JJ.