Case and Point
I previously published a blog post discussing the importance of our underwriting guidelines with respect to using a power of attorney when insuring transactions. Borders v. Borders (128 A.D. 3d 1542) is a case decided in May of 2015 setting aside a deed where a power of attorney was used.
In this case, the parties are siblings. The father who owned the property executed a power of attorney in favor of two of the siblings (defendants) granting them the power to dispose of his property. The plaintiff (who lived with the father) had several judgments against him. In an effort to keep the plaintiff from obtaining title to the property and then using the property to satisfy the claims of his creditors, the defendants used their power of attorney to transfer the property for no consideration to themselves and reserving a life estate for the father. That deed was recorded on 11/20/08. Unbeknownst to the defendants, the father executed a separate deed that was recorded 11/26/08 which conveyed title to the plaintiff while also reserving a life estate for father. The court, on appeal, reasoned that the transfer made by the defendants creates a presumption of impropriety that can be rebutted only with a clear showing that the principal intended to make the gift or that the gift was in the principal’s best interest. Here, since the father transferred title to the plaintiff, he demonstrated that he did not wish to give the defendants the property. And since there was no consideration for the transfer in defendant’s deed, the defendant’s intent was not to protect their father, but rather, to protect defendants’ future inheritance from the plaintiff and his creditors. Therefore the 11/20/08 deed transferring title to the defendants was deemed null and void.
This case is a classic example of the perils involved in dealing with powers of attorneys. Always contact company counsel when a power of attorney is used for a “self-serving” transaction. I also recommend reading (or re-reading) my previous blog from 10/27/2015 which is accessible under the “posts” section of our blog page.
Case law relied upon in this case: Mantella v. Mantella, 268 A.D.2d 852-853, N.Y.S.2d 715, Semmler v. Naples, 166 A.D.2d 751, N.Y.S.2d 116, and Matter of Ferrara 7 N.Y.3d 244, 254.