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Powers of Attorney
by Gary F. Casaly, Special Counsel
A power of attorney is nothing more than a delegation by one person to another permitting the latter to act on behalf of the former. Powers of attorney were originally governed solely by the common law, and were subject to all the impediments and limitations that existed in applying that law to the document. The basic rule under the common law was that the attorney in fact could not act if the principal would be unable to act on his or her own. For example, if the principal died or became mentally incapacitated, the attorney in fact could no longer act simply because the principal, under those circumstances, would be unable to act for himself or herself. Also, if the principal revoked the power the attorney in fact could no longer act. The problem under the common law, of course, was that it would not be known whether the principal no longer was able to act, or had revoked the power, and therefore it could not be determined whether the attorney in fact could continue to act on behalf of the principal.
Today we have the benefit of the Uniform Durable Power of Attorney Act (G.L.c. 201B), so some (but not all) of the deficiencies that arose at common law have been disposed of. That Act will be discussed in detail later in this article, but first I'm going to explore what elements are necessary in order to have a valid and binding power of attorney in the first place. Obviously, a power of attorney must be in the proper form and contain the powers necessary to carry out the act that is to be accomplished. So, too, the instrument that the attorney in fact tenders in connection with the exercise of the power (generally a deed or mortgage) must be in proper form. Form is important here, as we shall see, because the instrument is one of delegation and the exercise of the delegated power. In other words, it is the principal who is acting under the instruments, not the attorney in fact. Although the attorney in fact is "doing the work," it is the principal who is acting. This is not dissimilar to the situation involving an instrument from a corporation: although the officers may be signing papers, it is the corporation, and not the officers, that is acting under those instruments.
Let's first discuss the power of attorney itself. This instrument is the document that delegates authority to the attorney in fact. To be effective it must properly identify the principal and the capacity in which the principal is acting with respect to the delegation. It must clearly identify the agent and, if there is more than one, whether they need to act in concert or individually. The power of attorney must set out the authority given to the agent and the limitations, if any, on that authority, whether those limitations be in connection with the period of time the power can be exercised or the acts that can be undertaken. Finally, the instrument must be executed with the same formalities required with respect to any instruments that the attorney in fact gives pursuant thereto.
Who can delegate authority to an attorney in fact under a power of attorney? A minor cannot. A person under a mental disability cannot. A trustee cannot. An attorney in fact (the agent acting under the power) cannot, in that capacity, give a power of attorney. That would amount to delegation of authority, which is not permitted unless the initial power of attorney so provides. Of course, these are exceptions. But the point is that it is important to establish that the principal can in fact give the power.
Who can serve as an attorney in fact? I suppose we have the same questions posed above, but the real issue here arises where there is more than one attorney in fact designated in the power of attorney. It should be noted that if there are multiple attorneys in fact they must, unless the instrument otherwise provides, act in concert. So, in drafting or reviewing a power of attorney that names two or more attorneys in fact, it is necessary to determine whether the instrument permits them to act alternatively and individually. If not, they will have to act jointly. An important point here is that not only must the instrument tendered by the attorneys in fact in exercise of the power be executed by both, but it seems that it must be acknowledged by both on behalf of the principal. See Crocker's Notes on Common Forms, Little, Brown & Company (Seventh Edition, 1955), §349.
Obviously, the powers must be reviewed to make sure that any particular act undertaken by the attorney in fact is authorized by the instrument. On occasion, a power merely gives the attorney in fact the authority "to do anything or act that the principal could do if personally present." This language, on its own, is not sufficient for such acts as selling or mortgaging real estate. There should be specific language supporting the act to be done.
The real issue that most often arises in connection with a power of attorney revolves around the exercise of the power by the attorney in fact. The first point to remember is that it is the principal who is acting under the instrument tendered by the attorney in fact. For this reason the deed tendered by the attorney in fact must be in proper form, consistent with that fact. That is, the power must be exercised as the act of the principal and not that of the agent. For example, if Principal gives Agent authority to sell real property, the following form would be defective to pass the principal's title to the grantee:
I, Agent, attorney for Principal, grant to Grantee the property located at
The above form is defective because it purports to be the act of the agent and not the principal (even though the principal is mentioned). But the following form would be acceptable:
I, Principal, acting through Agent, grant to Grantee the property located at
Here, the instrument indicates that it is the principal who is acting through the agent.
As to the execution of the instrument given by the attorney in fact, there is flexibility regarding the signature used on the instrument purporting to exercise the power. Crocker's Notes on Common Forms, Little Brown and Company, (Seventh Edition, 1955), §351 states this regarding the signature:
Though "Principal by Agent" is the proper form of signature, other forms may not be invalid, the material points being that the deed should be the deed of the principal and not of the agent, and that the name of the principal should in some way appear in the signature. Thus a deed purporting to be the deed of A.B., and signed "C.D. for A.B.," was held to be well executed as the deed of A.B. Mussey v. Scott, 7 Cush. 215.
The acknowledgment of the instrument, similar to that in the case of a corporation, is made by the agent on behalf of the principal. It should be as follows:
Then personally appeared the aforementioned Agent and acknowledged the foregoing instrument to be the free act and deed of Principal.
So far, I've discussed the common law elements required to have a valid power of attorney and to properly exercise the authority given thereunder. But, as noted, the common law laid traps (the death of the principal, his or her subsequent incapacity, or revocation of the power) that might not be evident on the record, and yet would destroy the power.
The Uniform Durable Power of Attorney Act (G.L.c. 201B) resolves some of these issues and others as well. Essentially, a durable power of attorney is one that by its terms will not be affected by the subsequent disability or incapacity of the principal. The most familiar aspect of the statute is the provision concerning the affidavit by the attorney in fact when he or she is exercising the power of attorney. This provision is set out in G.L.c. 201B, §5:
As to acts undertaken in good faith reliance thereon, an affidavit executed by the attorney in fact under a power of attorney, durable or otherwise, stating that he did not have, at the time of exercise of the power, actual knowledge of the termination of the power by revocation or of the death, disability or incapacity of the principal shall be conclusive proof of the nonrevocation or nontermination of the power at that time. If the exercise of the power of attorney requires execution and delivery of any instrument that is recordable, such affidavit when authenticated for record shall be likewise recordable. This section shall not affect any provision in a power of attorney for its termination by expiration of time or occurrence of an event other than express revocation or a change in the capacity of the principal.
Even though at common law the revocation of the power by, or the death, disability or incapacity of the principal would void it, the affidavit, to the extent it addresses these events, if relied upon by the party dealing with the attorney in fact, will serve as "conclusive proof" of the nonrevocation or nontermination at the time of its exercise. If the power of attorney is a durable one, and to the knowledge of the attorney in fact the principal has become disabled or incapacitated, then the affidavit would not need to address the issue of competency of the principal (because the power is durable). See MCA Title Standard No. 34.
Note that this section applies to affidavits by attorneys in fact who are acting under powers of attorney "durable or otherwise." This is an important point, sometimes overlooked. Even though the power is not a durable one, the affidavit will nonetheless permit the common law limitations to be overcome.
The above section of the statute became effective on September 20, 1981. There was a predecessor statute, G.L.c. 201, §50, effective January 1, 1978 (which is now essentially incorporated into G.L.c. 201B, §4) that provided similar protection. Transactions involving powers of attorney before that time would, of course, not have an accompanying affidavit and would not enjoy the protection of the statute, but might otherwise be acceptable based on the conveyancing standards in effect at that time.
We know that the subsequent disability or incapacity of the principal will not terminate a durable power of attorney. But will a guardianship or conservatorship of the principal result in a termination of the power? Apparently not. It is provided in G.L.c. 201B, §3 that the conservator, guardian of the estate, or other fiduciary charged with the management of all of the property of the principal "shall have the same power to revoke or amend the power that the principal would have had if such principal were not disabled or incapacitated." This would indicate that the power of attorney would survive the filing of such a conservatorship or guardianship, unless steps were taken by the fiduciary to revoke it.
One last point about powers of attorney: Self-dealing, as in the case of trust, is prohibited under a power of attorney. See Gagnon v. Coombs, 39 Mass. App. Ct. 144, 654 N.E.2d 54 (1995). As the court said in Gagnon, "Such self-dealing by an agent, in the absence (as here) of distinct authority from the principal expressly granted in the empowering instrument, has been continuously and uniformly denounced as one of the most profound breaches of fiduciary duty, irrespective of the agent's good faith and however indirect or circuitous the accomplishment of the benefit to the agent."
This is an important point. Because self-dealing must be rejected in most cases, if the power of attorney is going to be used in connection with some estate planning strategy that contemplates, for example, a future conveyance to the attorney in fact in his or her capacity as a trustee, there may be a need to provide for self-dealing when drafting the power. There would have to be a "distinct authority from the principal expressly granted in the empowering instrument" in order to permit this to be accomplished.
1 Actually a minor could, but he or she would be able to disaffirm the authority in the same manner as under a deed. [Back to Text]
2 We will see that if the principal becomes mentally disabled after the power of attorney is executed the attorney in fact may nonetheless act on his or her behalf (depending upon the circumstances), but here we are discussing the execution of the power of attorney, and not acts in exercise thereof. [Back to Text]
3 Although prohibited from delegating discretionary powers, such as the authority to enter into contracts to sell real estate, trustees would, nonetheless, be empowered to delegate some ministerial acts. See Morville v. Fowle, 144 Mass. 109, 10 N.E. 766; Boston v. Curley, 276 Mass. 549, 177 N.E. 557. [Back to Text]
4 Again going back to the analogy regarding corporations, a deed from "Gary Casaly, agent for Stewart Title Guaranty Company" would not pass title to property owned by the corporation. [Back to Text]
5 It is a power of attorney that actually contains the words, "This power of attorney shall not be affected by subsequent disability or incapacity of the principal," or similar words showing the intent of the principal that the authority conferred shall continue notwithstanding the subsequent disability or incapacity of the principal. [Back to Text]