November 25, 2019 § 1 Comment
It sometimes happens that a client comes bearing process with a complaint attached alleging that he has a POA (power of attorney) and is guilty of self-dealing. “But,” he explains, “look at the POA. It clearly says right here that I have ‘full authority to handle, in his exclusive discretion, all matters and things in which [the principal] may be interested, in either business or personal affairs.'” He looks at you almost confidently, but certainly hopefully.
That was an element of the litigation between the estate of Dorothea Kolf and her surviving husband, Peter. The couple had executed a pre-marital agreement that provided each would own and surrender any claim to the other’s assets that predated the marriage. Peter, however, acting under a broad-power POA, withdrew some money from Dorothea’s accounts after she became cognitively incapacitated. A chancellor ordered him to repay into the estate the funds he had not used expressly for her benefit, and Peter appealed.
In Kolf v. Authement, Ex Rel. Estate of Kolf, handed down October 22, 2019, the COA affirmed on the chancellor’s ruling that Peter had misused the POA. Here is what Judge Barnes had to say for the court on point:
¶12. Alternatively, Peter argues that he had authority under the general power of attorney (POA) to withdraw the IRA funds. As stated, Dorothea executed the POA on August 7, 2008, naming Peter as her attorney-in-fact for financial purposes. The POA granted Peter “full authority to handle, in his exclusive discretion, all matters and things [in] which [Dorothea] may be interested, either business or personal affairs.”
¶13. The issue before us on appeal is whether the chancery court erred in awarding the IRA funds to Dorothea’s estate. Because the funds were Dorothea’s separate property under the terms of the Agreement, thereby making them a future estate asset, any authority that Peter may or may not have had to withdraw those funds under the POA is irrelevant. Moreover, an agent’s authority under a POA “does not permit the attorney-in-fact to engage in undisclosed, self-dealing activities.” West v. Johnston (In re Estate of Johnson), 237 So. 3d 698, 707 (¶23) (Miss. 2017).
“It is fundamental law that an agent owes his principal absolute good faith and fidelity, and he cannot in the exercise of his authority as agent acquire property or interest therein rightfully belonging to his principal without full disclosure and free consent of his principal.” McKinney v. King, 498 So. 2d 387, 388 (Miss. 1986). If disputed, the attorney-in-fact’s actions must be shown to be within the principal’s intent when granting the power of attorney, in the best interests and for the benefit of the principal, and in accord with the duty of good faith owed by the attorney-in-fact to the principal. Any property or interest obtained in violation of the attorney-in-fact’s fiduciary duty “thereby is voidable by, and may be set aside by the principal or his estate.” Id. In re Estate of Johnson, 237 So. 2d at 707 (¶22).
There was substantial evidence that the transfer of the IRA funds was not done with Dorothea’s “free consent.”
Unsurprisingly, the court ruled that the duty of good faith and fair dealing trumps the powers of the POA, no matter how broad and comprehensive they might be. And that’s pretty much the result that you can expect in every similar case. You can tell your client that.
July 27, 2015 § Leave a comment
Does the judgment closing a conservatorship (or guardianship, for that matter) bar a subsequent action to set aside transactions that could have been adjudicated within the conservatorship while it was open?
That was the question taken up by the MSSC in the case of Estate of White: White v. White, decided December 11, 2014.
In that case, Charles William White (Bill) and his son, Tommy, were partners in a convenience store operation. In 2000, Bill married Anita White. Tommy bought out Bill in 2005, and paid his father cash for his interest, but the two never exchanged deeds necessary to finalize the buyout.
By 2009, Bill was in need of a conservatorship due to declining health. Anita and Tommy disagreed strongly over the course of Bill’s care; Anita wanted to make him comfortable so he could die with dignity, and Tommy insisted on life-sustaining care. Tommy used a power of attorney (POA) to transfer Bill’s interest in the partnership properties to himself to complete the transfer.
Tommy filed a petition to be appointed conservator of his father. Anita filed a counterclaim asking that she be appointed instead, and she asked the court to set aside any and all transactions by which Tommy transferred interest in his father’s assets to himself using Bill’s POA.
The chancellor found a conservatorship to be in Bill’s best interest, but rather than appointing either Anita or Tommy, he appointed a third party.
When Bill died in 2009, the conservator petitioned to the court to be discharged and to distribute the assets of the conservatorship to Bill’s estate. Both Anita and Tommy agreed to an order to that effect. The order waived accounting, but did not mention Anita’s claim to set aside the POA transactions.
In 2010, Anita filed a complaint to set aside the POA transactions. Both parties filed motions for summary judgment. The court sustained Tommy’s motion, ruling that the order closing the conservatorship barred Anita’s subsequent action, because she had brought the action within the conservatorship, which had been closed.
Anita appealed, and the COA affirmed, finding that the four identities of res judicata were present, and that, therefore, her action was barred.
The MSSC granted cert, and reversed both the COA and the chancellor. Here is how Justice Dickinson addressed the issue for a unanimous court (Justice Lamar not participating):
¶9. We conduct a de novo review of a trial court’s grant of summary judgment. A civil defendant may raise res judicata in a motion for summary judgment where a plaintiff’s suit centers around issues decided in a previous lawsuit. But for res judicata to apply, the defendant must show that the judgment rendered in the previous action was a final judgment on the merits.
¶10. A final judgment on the merits is “[a] judgment based on the evidence rather than on technical or procedural grounds.” While our prior cases have considered whether a judgment constituted a “final judgment on the merits” on a case-by-case-basis, a judgment generally will not be considered a “final judgment on the merits” when the first case was dismissed for a procedural defect or some other technical ground that prevented the court from reaching the merits of the case. If, in the previous case, the court did render a final judgment on the merits, res judicata will apply if both cases share four common identities.
¶11. In granting Tommy’s motion for summary judgment, both the chancellor and Court of Appeals thoroughly analyzed the four common identities necessary for res judicata to apply, but both courts failed to analyze the threshold requirement of a final judgment. Absent a final judgment, the alignment of the four identities is irrelevant.
¶12. The chancellor’s order discharging the conservator did not address any of the contested issues. As our precedent shows, a judgment based on technicalities or procedural issues generally will not be considered a final judgment on the merits. In his order discharging the conservatorship, the chancellor could have rendered a judgment on the contested claims between Tommy and Anita, but he did not.
¶13. The record indicates that the conservatorship was opened in early 2009 and closed when Bill died in June 2009. Far from a final judgment concerning the merits of the contested issues, the final judgment discharging the conservator was based solely on Bill’s death. The chancellor considered no other evidence when entering his order. Although Tommy correctly points out that Anita requested the court set aside the deed transfers in the conservatorship proceeding, the chancellor never addressed the issue.
[NOTE: Authority supporting the above language was set out in footnotes that were omitted in this post because they are too tedious to copy and paste. You can click on the link above to access the full opinion.]
You can take away from this that an order or judgment closing a conservatorship or guardianship does not extinguish the claims that were raised during the time that it was opened.
What would have been the outcome if Anita had not filed her claim to set aside the transactions while the conservatorship was open? My thinking without research is that she would have had a viable claim if she filed within the statute of limitations. What do you think?