In Terrorem Clause Construed to Apply to Revocation Proceeding
April 30, 2010
In a decision issued yesterday by the First Department, the Appellate Division affirmed the Surrogate’s holding that a proceeding pursuant to SCPA §711 to revoke letters testamentary and letters of trusteeship would trigger an in terrorem clause. The petitioner alleged that the fiduciaries failed to inform the decedent of the benefits to which they would be entitled as a result of their fiduciary positions.
The subject in terrorem clause in Hallman v Bosswick, 2010 NY Slip Op 03486 (1st Dept 2010) provided that it would be triggered by any beneficiary who was to commence a proceeding “‘to void, nullify or set aside all or any part’ of the will”. Noting that a revocation proceeding did not fall within the safe harbor provisions of EPTL §3-3.5(b), the Court stated that its determination would be based upon the decedent’s expressed intent.
The respondents, the co-executors and co-trustees whose letters would be placed in issue by the proposed revocation proceeding, had no familial relationship to the decedent. Based on this fact, the petitioner, a child of the decedent, argued that because the will provided no bequests for respondents, the decedent must have intended to limit the scope of the in terrorem clause to challenges against his family members. The Court disagreed. It opined that the decedent’s choice to leave his estate in trusts for his children and grandchildren, as opposed to making outright devises, illustrated an intent to deprive them of complete control over his assets; an intent that was furthered by his nominating non-relatives as co-executors and co-trustees.
The Court also disagreed with the petitioner’s alternate assertion that if the testator had intended the clause to be triggered by the commencement of a SCPA §711 proceeding, public policy should prevent its enforcement. According to the Court, this argument was conditioned upon a rule that the safe harbor provisions of EPTL §3-3.5 are not exclusive, and despite the recent decision of the Court of Appeals in Matter of Singer, 13 NY2d 447 (2009) which stated as much (as discussed in a prior entry), the First Department opined that the language was dicta. Thus, the Court rejected the petitioner’s public policy argument, reasoning that a court’s expansion of the safe harbor provisions should not originate with a lower or intermediate court, but instead with the Court of Appeals.
This last argument is an interesting perspective on Singer, and may pave the way for a conservative interpretation of the Court of Appeals’ decision. Accordingly, we may have to wait for the Court of Appeals to implement its own rule as law before the lower courts will follow suit.