| Schwartz v JPMorgan Chase Bank, N.A. |
| 2011 NY Slip Op 04088 [84 AD3d 575] |
| May 17, 2011 |
| Appellate Division, First Department |
| Richard J. Schwartz and Another, as Executors of Irene Schwartz,Deceased, Respondents, v JPMorgan Chase Bank, N.A.,Appellant. |
—[*1] Lynn, Gartner & Dunne, LLP, Mineola (John W. Dunne of counsel), forrespondents.
Order, Supreme Court, New York County (Eileen Bransten, J.), entered September 9, 2010,which denied defendant's motion for summary judgment dismissing the complaint, unanimouslyreversed, on the law, with costs, and the motion granted. The Clerk is directed to enter judgmentin defendant's favor dismissing the complaint.
In 1979, plaintiffs' mother, the decedent, opened an investment management account withChase Manhattan Bank, predecessor to defendant JPMorgan Chase (Chase). There is no claim ofnegligence or breach of duty with respect to Chase's handling of that account. Plaintiffs' claimrelates to a completely separate dividend reinvestment account (DRA), one of six such accountsopened in the name of plaintiffs' decedent, each of which contained shares of stock in anindividual company. Each of these DRAs was maintained by the transfer agents for the companythat issued that account's stocks. The shares of stock in these DRAs were never transferred toChase, and Chase had neither the right nor the obligation to manage these assets.
The claims in this matter relate to the DRA that contained shares of a pharmaceuticalcompany called Warner-Lambert Co. at the time the account was opened; the company is nowPfizer, Inc. Other shares issued by the same company were also contained in the Chaseinvestment management account (IMA).
From about the mid-1980s until shortly before this action was commenced in March 2006,quarterly notices and annual 1099 tax forms relating to the DRAs were sent to defendant Chase.As it was instructed upon inquiring of plaintiffs' decedent when it first received such a notice,Chase forwarded each of these notices to the decedent's accountant as an accommodation to itsclient.
Plaintiff Richard Schwartz began handling his mother's financial concerns after he and hissister, plaintiff Lois Zenkel, were granted power of attorney on November 21, 1996. Despite thelisting in his mother's yearly tax returns of dividends from a Warner-Lambert/Pfizer dividendinvestment account, separate and distinct from the listing for the dividends from the Chase IMA,he did not become aware of the existence of the Warner-Lambert/Pfizer DRA or the other DRAsuntil January 12, 2006, at a meeting with several Chase bankers who handled plaintiffs' variousChase accounts. Upon learning that Chase had been forwarding the DRA notices to hisaccountant rather than to him, he transferred all his mother's assets out of Chase and to another[*2]investment company. He also sold the stock in the DRAs,including the Pfizer stock in the DRA for $6,893,684, resulting in a capital gain of $5,837,395.
Plaintiffs base their claims against Chase on its failure to forward the DRA notices and formsto plaintiffs, or to apprise Richard Schwartz of the existence of that DRA. They claim that thisdeprived them of the ability to manage the assets.
The record presents no issues of fact as to whether Chase breached any duty owed toplaintiffs. The duty Chase owed to plaintiffs encompassed the handling of those accounts held byChase. It did not extend to unrelated dividend reinvestment accounts with other financial agents.The fact that Chase received unsolicited notices and forms from other financial agents regardingseparate DRAs created no duty on Chase's part as to those DRAs. The act of voluntarilyforwarding those notices and forms to plaintiffs' accountant, as plaintiffs' decedent originallyrequested, does not create any such duty. Chase was not obligated to ensure that plaintiffs wereinformed of the existence of an account, which it did not control and over which it had noresponsibility, merely because it undertook the ministerial duty of forwarding the notices sent tothe investor in care of Chase to the investor's accountant, at the investor's request (see AG Capital Funding Partners, L.P. vState St. Bank & Trust Co., 11 NY3d 146, 157 [2008]).
Moreover, the record conclusively establishes that plaintiffs had constructive notice of theexistence of that account. The decedent's tax return for each of the years from 1997 through 2005contained a Schedule B setting forth separately the dividends paid to her through Chase's IMAand the dividends paid to her through the other provider in connection with the DRA. RichardSchwartz assumed responsibility for the decedent's finances in November 1996, reviewed her taxreturns every year, and began signing the returns as her attorney-in-fact possibly as early as 1997,but certainly in 2001, and is therefore deemed to have constructive knowledge of its contents(see Hayman v Commissioner of Internal Revenue, 992 F2d 1256, 1262 [2d Cir 1993]).He even conceded at his deposition that a person reviewing those schedules would understandthat the DRA dividends were distinct from the IMA dividends and were related to shares of stockheld outside of defendant. Moreover, in signing the tax returns as attorney-in-fact, plaintiffaffirmatively declared that he had examined the returns and their schedules and that they were"true, correct and complete." Therefore, plaintiffs cannot be permitted to claim a right ofrecovery against Chase for any loss they claim as a result of lack of knowledge of the DRA (see Mahoney-Buntzman v Buntzman,12 NY3d 415, 422 [2009]; see also Zemel v Horowitz, 11 Misc 3d 1058[A], 2006NY Slip Op 50276[U] [2006]). Schwartz's assertion, in papers submitted in opposition todefendant's motion, that he would not have understood the import of the schedules even if he hadreviewed them, contradicts his deposition testimony and raises only a feigned [*3]issue of fact as to his constructive knowledge of the DRA (seeJoe v Orbit Indus., 269 AD2d 121, 122 [2000]).
Defendant's motion for summary judgment should therefore have been granted.Concur—Tom, J.P., Saxe, DeGrasse, Freedman and Abdus-Salaam, JJ.