March 2000

A PUBLICATION OR THE TITLE COMPANY OF NORTH CAROLINA

     

POWER OF ATTORNEY -SELECTED ISSUES

1. General Comments.


There are certain issues involving powers of attorney that are of mutual concern to the title insurer and the title examining and closing staff of the closing attorney. This article will discuss statutory form powers and non-statutory form powers.

A power of attorney must be given by a person competent to give the power, just like a person must be competent to give a deed. A person signing a power must be at least 18 years of age. An exception would be where one spouse is 18, the other spouse is younger and title is vested in both spouses. In such a case, both spouses, if otherwise competent, can execute a power of attorney affecting the real property; G.S. 39-132(a)(2).

Pursuant to G.S. 39-12, every competent married person at least 18 years of age can execute, without the joinder of the non-owner spouse, a power of attorney affecting that spouse's real property naming either a third party or, subject to G.S. 52-10 or G.S. 52-10.1, the spouse as attorney-in-fact. When the spouse is named attorney-in-fact, the acknowledgment of the spouse is not necessary. Because of the way G.S. 39-12 is written, while a power of attorney naming a spouse as attorney-in-fact must comply with G.S. 52-10's requirement to comply with public policy and can, pursuant to G.S. 52-10, be with or without valuable consideration, the non-owner spouse need not execute the power or acknowledge it.

The person granting the power must not have been adjudicated incompetent, since that would invalidate the power. Also, the person granting the power, even though not adjudicated incompetent, must not be incompetent at the time the power is granted since that would make the power voidable. When a power of attorney and a transaction executed pursuant thereto is found in the back chain of title, the title insurer will assume the competency and majority of the power's grantor unless actual knowledge or record notice of the contrary comes to the attention of the approved attorney's staff.

The initial competency of the power's grantor in the current transaction in which the attorney-in-fact will execute an instrument is of greater and more apparent concern. If the grantor of the power is a spouse and the power is being granted as a convenience (for example, the grantor cannot attend the closing), the issue of initial competence of the grantor would not seem to be a probable problem. On the other hand, if the grantor of the power was in a hospital or nursing home (assuming no adjudication of incompetency) when the power was granted, it would be reasonable to investigate further. For example, a doctor's letter stating that at the time the power was granted, the grantor was competent and knew the nature and extent of his or her act in executing the power is helpful. If the power was executed before the grantor entered the nursing home or hospital, while the doctor's letter would still be helpful, further substantiation of the grantor's competence at the time of the power's execution might be needed. This could take the form of affidavits from neighbors or the attorney for the grantor. It is noted that these concerns are identical to those arising when the grantor is executing a deed or deed of trust instead of a power of attorney.

The instrument given by the attorney-in-fact can be signed and/or acknowledged in the name of the principal by the attorney-in-fact or by the attorney-in-fact designating himself as attorney-in-fact for the principal or acknowledged in the name of the attorney-in-fact without naming the principal from which it will appear that it was the purpose of the attorney-in-fact to be acting for the principal. G.S.47-115.

Regarding execution of a power of attorney; G.S. 47-43.1 provides that when an instrument purports to be executed by parties acting through another by virtue of a power of attorney, it shall be sufficient if the attorney or attorney-in- fact signs such instrument either in the name of the principal by the attorney or attorney-in-fact or signs as attorney or attorney-in-fact for the principal; and if such instrument purports to be under seal, the seal of the attorney-in-fact shall be sufficient. see the discussion of seals noted herein. G.S. 47-43 contains a non-exclusive acknowledgment form.

The power of attorney should be recorded before the deed or other instrument given by the attorney-in-fact. The power of attorney is usually indexed under the name of the two parties to the instrument. The deed or other instrument given by the attorney-in-fact is usually indexed under the name of the principal and the attorney-in-fact. G.S.47-115.

2. G.S. 32A-l - Statutory Short Form Power of Attorney.

G.S. 32A-1 sets out a form power of attorney.  The statute allows the power to grant the attorney-in-fact the power to (1) name another attorney-in-fact to act in his place and (2) to revoke such an appointment.  An express term limitation on the power can be included.  The power can state that the power shall not be affected by the grantor's subsequent incapacity or mental incompetence thereby becoming a durable power as discussed below or, the power can state that it becomes effective only after the grantor becomes incapacitated or mentally incompetent.

The form shows the word "seal" alongside the grantor's signature. That was to make it clear that if a power was to be used by the attorney-in-fact to sign an instrument under seal the power must be executed under seal, as G.S. 47-43.1 states. However, effective June 25, 1999, G.S. 39-6.5 eliminated the requirement of a seal for a valid conveyance. G.S. 47-43.1 still states that if an instrument is to be executed by the attorney-in-fact under seal, the power of attorney must have been executed under seal. While there is some uncertainty as to a resolution, it seems that if a power of attorney is not executed under seal but the deed, on its face, is, the result will be that the power is valid, the deed is valid but the deed is deemed not to be under seal. The effect of a seal is discussed in G.S. 1-47 (statute of limitations). But for validity, a seal is not required. G.S.39-6.5.

One of the powers that can be granted in the statutory form power is the power to act in "real property transactions."  That term is defined in G.S. 32A-2(1) in all inclusive terms. The power includes the power to sell, convey, mortgage, lease or purchase real property The power pertains to land that the grantor of the power owns at the time of the power's execution or acquires thereafter. The attorney-in-fact can contract to sell under this power. The attorney-in-fact can determine the terms and conditions of the authorized act.

Other powers that can be included in the statutory form power are the power to make gifts to (1) charities and individuals other than the attorney-in-fact pursuant to G.S. 32A-2(14) and (2) the attorney-in-fact pursuant to G.S. 32A- 2(15). G.S. 32A-2(14)a. provides that, except as provided in G.S. 32A-2(14)b., the attorney-in-fact can make gifts to any individual, other than the attorney-in-fact, or to certain charitable organizations, in accordance with the principal's personal history of making or joining in the making of lifetime gifts. G.S. 32A-2(14)b. states that, except as provided in G.S. 32A-2(14)c., or unless gifts are expressly authorized by the power of attorney under G.S. 32A-2(15), a power described in G .8. 32A-2(14 )a. may not be exercised in favor of the attorney-in-fact or the estate, creditors or the estate of the attorney-in-fact. G.S. 32A-2(15) contains a power to make gifts to the attorney-in-fact named in the power of attorney or the estate, creditors, or creditors of the estate of the attorney-in-fact, in accordance with the principal's personal history of making or joining in the making of lifetime gifts. G.S. 32A-2(14)c. states that if the power described in G.S. 32A-2(14)a. is conferred upon two or more attorneys-in-fact, it may be exercised by the attorney-in-fact or attorneys-in-fact who are not disqualified by G.S. 32A-2)14)b. from exercising the power of appointment as if they were the only attorney-in-fact or attorneys-in-fact.  G.S. 32A-2(14)d. provides that an attorney-in-fact expressly authorized by this section to make gifts of the principal's property may elect to request the clerk of the superior court to issue an order to make a gift of the property of the principal.

G.S. 32A-2(14) and (15) were originally effective October 1, 1995 but are applicable to powers of attorney executed prior to, on or after that date.  E. Urban and G. Whitney, North Carolina Real Estate, Sec. 25-46 (Harrison Co. Supp. 1999).

With respect to gifts, Whitford v. Gaskill, 345 N.C. 475, 480 S.E. 2d 690 (1997), should be noted. The power of attorney used the then existent statutory form in G.S. 32A-1 which included the statutory power to transfer real property in G.S. 32A-1(1) and also added the specific authority to conduct "real property transactions, including the power to transfer the real estate known as the homeplace that I inherited from my mother." The attorney-in-fact transferred the principal's real property to the attorney-in-fact's sister. The Supreme Court held that (1) an attorney-in-fact acting pursuant to a broad general power of attorney lacks the authority to make a gift of the principal's real property unless that power is expressly conferred, which the then existent powers in G.S. 32A-2(1) did not do, and (2) the above quoted additional power set out in the power of attorney did include the power to make a gift since "transfer" can include transfer by gift. G.S. 32A- 2(14) and (15) did not exist when the power of attorney in Whitford was prepared. Also, the court noted that those statutes were expressly made limited to gifts made "in accordance with the principal's personal history of making or joining in the making of life time gifts" as specified in G.S. 32A-2(14)a. The Whitford court stated that the new statute had no effect on a power of attorney where there was no such "personal history" and no other express power to make gifts added to form statutory powers as amended. Urban and Whitney, Supra. at Sec. 25-47.

3. Durable Power of Attorney;

As noted in 2 above, a G.S. 32A-1 form power can be made a durable power. The authority for that is found in G.S. 32A-8. If the power is effective only upon the principal's subsequent incapacity or mental incompetence, a person can rely upon an affidavit executed by the attorney-in-fact setting forth the fact that such conditions exist, unless the person has actual knowledge to the contrary, subject to G.S. 32A-13 pertaining to revocation of a power. G.S. 32A-8.

G.S. 32A-9 provides that any act of the attorney-in-fact pursuant to the durable power during the principal's incapacity or incompetence binds the principal and his successors in interest if the power has been registered under G.S. 32A-9(b). G.S. 32A-9(b) provides that the power will not be valid subsequent to such incompetence or incapacity unless it is so registered. G.S. 32A-9(b) states that the power must be registered in the office of the register of deeds of that county in this State designated in the power of attorney, or if no place of registration is designated, in the office of the register of deeds of the county in which the principal has his legal residence at the time of such registration or, if the principal has no legal residence in this State at the time of registration or the attorney-in-fact is uncertain as to the principal's residence in this State, in some county in the State in which the principal owns property or the county in which one or more of the attorneys-in-fact reside.  A power of attorney executed pursuant to the provisions of the Article shall be valid even though the time of such registration is subsequent to the incapacity or mental incompetence of the principal.

Note that if the power of attorney is silent, as to place of registration, the power can be registered in the county where the principal's land lies only if the principal has no legal residence in North Carolina or the attorney-in-fact is uncertain as to such residence. Pertaining to a durable power, G.S. 32A-9(c) states that "Any person dealing good faith with an attorney-in-fact acting under a power of attorney executed under this Article shall be protected to the full extent of the powers conferred upon such attorney-in-fact, and no person so dealing with such attorney-in-fact shall be responsible for the misapplication of any money or other property paid or transferred to such attorney-in-fact." The use of the word "executed" may imply that as long as execution of the power is valid, the person dealing with the attorney-in-fact in good faith will be protected by the provisions of G.S. 32A-9 even if the power of attorney is registered in the wrong county unless the face of the power of attorney reveals that the county of registration is incorrect.

G.S. 32A-10 provides that a court appointed fiduciary for the principal can revoke the power. The power can outline appointment, resignation, removal, substitution, powers and duties of the attorney-in-fact. G.S.32A-12(a). If all the attorneys-in-fact die or cease to exist or cannot act and all methods of substitution have been exhausted, the power ceases. G.S.32A-12(b).

G.S. 32A-13(a) governs revocation of a durable power registered under the article. Death of the principal revokes the power. Also, the power is revoked by registration in the office of the register of deeds where the power of attorney has been registered of an instrument of revocation executed and acknowledged by the principal while he is not incapacitated or mentally incompetent, or by the registration in such office of an instrument of revocation executed by any person or corporation who is given such power of revocation in the power of attorney; or by the Article, with proof of service thereof in either case on the attorney-in-fact in the manner prescribed for service of summons in civil actions.

G.S. 32A-13(b) governs revocation of a power executed pursuant to the Article, but not registered pursuant to the Article.

G.S. 32A-13(c) provides that: "As to acts undertaken in good faith reliance upon an affidavit executed by the attorney-in-fact stating that he did not have, at the time of exercise of the power, actual knowledge of the termination of the power by revocation pursuant to the provisions of G.S. 21A-13(b) or by the principal's death, such affidavit is conclusive proof of the nonrevocation or nontermination of the power at that time.  This section does not affect any provision in a power of attorney for its termination by the expiration time or occurrence of an event other than an express revocation."

G.S. 32A-9 and G.S. 32A-13 are in need of some reconciliation. As noted, G.S. 32A-9(b) says no durable power shall be valid subsequent to the principal's incompetence unless it is registered under G.S. 32A-9. G.S. 32A-9(b) also states that if the power is executed under the Article, it will be valid if registered subsequent to the principal's incompetence. So, under G.S. 32A-9(b), as long as the power is properly registered, registration subsequent to incompetence is satisfactory. However, as noted, G.S. 32A-13(b) provides rules of revocation for a durable power executed pursuant to the Article but not registered. Therefore, the implication of G.S. 32A-13(b) is that until an act of revocation occurs under G.S. 32A-13(b), the power is valid even though never registered, somewhat inconsistent with G.S. 32A-9(b). Since incompetence of the principal is not listed as an act of revocation under G.S. 32A-13(b), if the power is never registered under G.S. 32A-9(b), the principal's incompetence will apparently revoke the power and G.S. 32A-9(c) and G.S. 32A-13(c)will not protect a party relying upon the power. However, as long as the power of attorney exists, it can be registered after incompetence under G.S. 32A-9(b).

A durable power can incorporate the powers in G.S. 32A-l.

4. Other Powers of Attorney.

Powers of attorney other than the statutory form are permitted. G.S. 32A-3. The concern about initial competence of the principal or grantor of the power at the time of its execution are the same as discussed above. A form other than the form suggested in G.S. 32A-l can also be a durable power of attorney as discussed in 3 above but a power could incorporate by reference the powers in G.S. 32A-2. The execution, acknowledgment and registration rules are the same. Article 2A of Chapter 32A, pertaining to authority of the attorney-in-fact to make gifts, applies. So does Article 2B pertaining to gifts authorized by court order.

A power might say, "I, [the Principal], grant to [my attorney-in-fact] the full power to deal in all respects whatsoever as owner with my property now owned or hereafter owned as I would or might myself." We believe that this confers a power to sell, for example.

Corporate powers of attorney will be discussed in another newsletter. 

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