February 9, 2011

California Power of Attorney

A power of attorney is a legal term that many people have heard of because of its occasional use in everyday life. For example, it is not uncommon for somebody (the principal) to grant to their friend (the agent) the authority to sign for them on the sale or purchase of a home if they unexpectedly have to leave the area. This aforementioned example has been used by my relatives numerous times.

However, there are very serious consequences when executing or allegedly executing a power of attorney, as illustrated by the following two cases. The point behind these two cases is to highlight the dangers of a power of attorney as due to the regular use of a power of attorney it is easy to mistakenly assume that a power of attorney is a simple legal document with minimal power. Thus, one should play close attention wherever they hear the term “power of attorney” lobbed around in a conversation due to its significant legal ramifications.  

Estate of Kraus (2010) 184 CA4th 103

On October 22, 2006, Janice Kraus, who was stricken with terminal cancer and semi-comatose, executed a power of attorney in favor of her brother David whereby David would serve as Janice’s agent. The very next day, October 25, 2006, David withdrew $197,402 of Janice's money from various bank accounts and deposited the funds into accounts held by David and David’s wife. 

One of the accounts was owned in joint tenancy by Janice and her mother, and other accounts had pay-on-death beneficiaries. Thus David would not inherit any of the money in Janice’s bank accounts. Janice’s estate plan included a revocable trust and pour-over will. The trust beneficiaries were the Regents of the University of California and the Make-A-Wish Foundation. 

On October 24, 2006, Janice passed away and shortly thereafter the trust beneficiaries of Janice’s estate came looking for David in light of his conduct. In response to allegations of misappropriation, David, surprisingly, denied that he was guilty of any wrongdoing. Undeterred by David’s brazen denial, the trust beneficiaries sued for return of the funds that David has misappropriated, $197,402 and also sued for double damages, $394,804, because David had allegedly misappropriated Janice’s property in violation of the California Probate Code. Prob C §859. Ultimately, in light of David’s wrongdoing, David was ordered to deliver $197,402 plus the statutory penalty of $394,804 to a court-appointed personal representative of the estate that was to be distributed to Janice’s beneficiaries.  

Jackson v. County of Amador (2010) 186 CA4th 514 

Jewel Jackson owned two rental houses in Ione, California. Ione is an old gold-mining town in the County of Amador situated on the foothills of the Sierra Nevada Mountains. 

Willie Norton, Jewel’s brother, executed a fraudulent power of attorney whereby Norton would serve as Jackson's agent. The problem with the power of attorney was that Jackson never signed the document as the principal and thus Norton was never appropriately granted the authority to act as Jackson’s agent. Nevertheless, Norton subsequently executed two quitclaim deeds in which Norton, purporting to act as Jackson's agent, transferred the two rental houses from Jackson to Norton. Of note, this would be a classic case of “self-dealing.” 

Norton then demanded that the tenants vacate the houses for reasons unknown. This caused Jackson to incur a loss of rental income, and in turn. Jackson was unable to timely make her mortgage payments for the two properties. Ultimately, Jackson was able to have the deeds recorded by her unscrupulous brother cancelled albeit after paying thousands of dollars in attorney fees.