A PUBLICATION OR THE TITLE COMPANY OF NORTH CAROLINA
DEALING THROUGH ATTORNEY-IN-FACT
Can a corporation sell and convey real property
through a power of attorney? The issue is not whether an attorney-in-fact
can properly execute, for example, a deed. The issues are, how is that done and can the corporation also delegate to the
attorney-in-fact decision making responsibility
regarding when to make a conveyance? Our conclusion is set out in 3 below
with a background legal discussion of statutes set forth in 2 below. It
should be noted that our comments pertain to the current transfer to be
insured. Transfers in the back chain of title are usually assumed valid by
the title insurer absent knowledge or notice to the contrary.
2. Discussion of statutes
G.S. 55-3-02 sets out a corporation's general powers. G.S. 55-3- 02(a) provides that:
Unless its articles of incorporation or this Chapter
provide otherwise, every corporation has perpetual duration and succession
in its corporate name and has the same powers as an individual to do all
things necessary or convenient to carry out its business and affairs,
including without limitation power:...
make and amend bylaws, not inconsistent with its articles of incorporation
or with the laws of this State, for managing the business and regulating
the affairs of the corporation;
(4) To purchase, receive, lease, or otherwise acquire, and
own, hold, improve, use, and otherwise deal with, real or personal
property, or any legal or equitable interest in property, wherever
sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of
an or any part of its property; ...
(7) To make contracts and guarantees, incur liabilities, borrow money, issue its notes, bonds, and other obligations (which may be convertible into or include the option to purchase other securities of the corporation), and secure any of its obligations by mortgage or pledge of any of its property, franchises, or income;...
(11) To elect or appoint directors, officers, employees, and agents of the corporation, define their duties, fix their compensation, and lend them money and credit;
G.S. 55-3-04 sets forth the statutory law of "ultra vires." G.S. 55-3-04(a) provides that, "Except as provided in subsection (b), the validity of corporate action may not be challenged on the ground that the corporation lacks or lacked power to act." G.S. 55-3-04(b) allows a shareholder to sue the corporation to enjoin an act and allows the corporation to sue former or incumbent directors, officers, employees or agents. It also allows proceedings by the Attorney General under G.S. 55-14-30. G.S. 55-3- 04(c) states that if the shareholders proceed as noted above, the court may enjoin or set aside the act, if equitable and if all affected persons are parties to the proceeding, and may award damages for loss (other than anticipated profits) suffered by the corporation or another party because of enjoining the unauthorized act.
The Official Comment states that:
Under this section it is unnecessary for persons
dealing with a corporation to inquire into limitations on its purposes or
powers that may appear in its articles of incorporation. A person who is
unaware of these limitations when dealing with the corporation is not
bound by themů
The language of [G.S. 55-03-04] extends beyond contracts and conveyances of property; "corporate action" of any kind cannot be challenged on the ground of ultra vires. For this reason it makes no difference whether a limitation in articles of incorporation is considered to be a limitation on a purpose or a limitation on a power; both are equally subject to [G.S. 55-03- 04]...
[G.S. 55-03-04], however, does not validate corporate
conduct that is made illegal or unlawful by statute or common law
sum, notwithstanding G.S. 55-3-04, the reader must look elsewhere to see
if a corporate action is properly authorized and executed. G.S. 55-12-01
and G.S. 55-12-02 are therefore relevant.
G.S. 55-12-01(a) provides that a mortgage of or other
security interest in all or any part of the property of a corporation may
be made by authority of the board of directors without approval of the
shareholders, unless otherwise provided in the articles of incorporation
or in bylaws adopted by the shareholders.
The rule in G.S. 55-12-01(a) pertains to any
mortgage or other security interest. G.S. 55-12-01 (b)(1) applies to
sales of all or substantially all of the property in
the regular course of business. If all or substantially all of the
property is not involved, G.S. 55-12-01(b)(1) does not apply and G.S.
55-12-02, discussed below, does not apply. G.S. 55-12-01(b)(2) pertains to
transfers to subsidiaries.
The Official Comment to G.S. 55-12-01 states that most transfers of "all or substantially all" of the corporate property are, "almost by definition, not in the usual and regular course of business." The comment goes on to state that such sales by real estate corporations can be in the usual and regular course.
When the board must act, G.S. 55-8-21 states that
unless the articles of incorporation or bylaws provide otherwise, the
board may take action without a meeting if the action is taken by all members of the board.
G.S. 47-18.3(e) was amended in 1999. It now provides that any corporation may convey an interest in real property which is transferable by instrument which is duly executed by either an officer, manager, or agent of said corporation and has attached thereto a signed and attested resolution of the board of directors of said corporation authorizing the said officer, manager, or agent to execute, sign, seal, and attest deeds, conveyances, or other instruments. G.S. 47-18.3(e) shall be deemed to have been complied with if an attested resolution is recorded separately in the office of the register of deeds in the county where the land lies, which said resolution shall be applicable to all deeds executed subsequently thereto and pursuant to its authority. All deeds, conveyances, or other instruments which have been heretofore or shall be hereafter so executed shall, if otherwise sufficient, be valid and shall have the effect to pass the title to the real property described therein.
G.S. 47-18.3(b) provides that any instrument
registered in the office of the register of deeds, appearing on its face
to be executed by a corporation, foreign
or domestic, and bearing a seal which purports to be the corporate
seal, setting forth the name of the corporation engraved, lithographed,
printed, stamped, impressed upon, or otherwise affixed to the instrument,
is prima facie evidence that the
seal is the duly adopted corporate seal of the corporation, that it has
been affixed as such by a person duly authorized to do so, that the
instrument was duly executed and signed by persons who were officers or agents of the corporation acting by authority duly given by
the board of directors, and that any such instrument is the act of the
corporation, and shall be admissible in evidence without further proof of
Summary and Conclusion
Situations where G.S. 55-12-02 does not apply
Situations where G.S. 55-12-02 applies
The above analysis of applicable statutes shows existent statutes do not perfectly resolve the issues and that G.S. 47-18.3 should be further amended to add another subsection making it clear that, notwithstanding any other provision of the General Statutes to the contrary, if a power of attorney and corporate resolution is recorded authorizing any attorney-in-fact to act for the corporation (and such documents are not forged), a purchaser, lender or lessee for value without actual knowledge of lack of authority for the power of attorney may rely upon the power of attorney unless notice of its revocation is recorded in the register of deeds' office.
Of course, if a power of attorney only authorizes the attorney-in-fact to execute and acknowledge documents and does not authorize him to make the corporate decision to sell, proper authorization for the transfer will have to be investigated.
Chapter 55A, pertaining to non-profit corporations,
contains similar provisions.
How power of attorney is executed and acknowledged by a corporation
The amended acknowledgment form in G.S. 47-41.01(b) makes it clear that an "official of the corporation" (defined in G.S. 47- 41.01(d)(4) to include the chairman, president, chief executive officer, a vice-president or an assistant vice-president, treasurer, or chief financial officer, or any other agent authorized by a G.S. 47-18.3(e) resolution) may execute the power of attorney for the corporation and that the execution may be attested by another person who is an "attesting official of the corporation" (defined in G.S. 47-41.01(d)(5) to include the secretary or assistant secretary, trust officer, assistant trust officer, associate trust officer or in the case of a bank, its secretary, assistant secretary or assistant cashier), with the common or corporate seal being attached. Of course, due to G.S. 39-6.5, the seal is not required except for "prima facie evidence" of validity pursuant to G.S. 47-18.3(b). If the seal is omitted from execution, it can be omitted from the acknowledgment. G.S.47-41.01(d)(6). Also, due to the addition of the new acknowledgment form in G.S. 47-41.01(c), it is clear that the power of attorney can be executed and acknowledged by one "official of the corporation" for the corporation without a seal for the reasons noted above, unless the "prima facie evidence" benefit noted above is desired.
Regardless of what form of execution and acknowledgment discussed above is used, it would be helpful if the acknowledgment went on to add that the power of attorney was authorized by an attached resolution of the board without the necessity of shareholder approval (if that is the case) or made reference to such a resolution recorded separately pursuant to G.S. 47-18.3(e). If shareholder approval is required and obtained under G.S. 55-12- 02, it would be helpful for this to be recited as well.
While G.S. 47-28 allows a power of attorney to be recorded it does not expressly require recordation. Nevertheless, it is wise to record the power in the county where the real property is located prior to the recordation of the instrument executed by the attorney-in-fact for the corporation. The power of attorney will be indexed in the name of the principal and the attorney-in-fact. See G.S. 161-22(a).
How a deed or other instrument must be executed and acknowledged by the
G.S. 47-43.1 pertains to execution and acknowledgment by an attorney-in-fact and should be consulted. G.S. 47-43 sets out a non-exclusive form acknowledgment. It is interesting to note that G.S. 47-43.1 still provides that for an instrument, such as a deed, to be executed under seal, the power of attorney must be under seal.
The form acknowledgment in G.S. 47-43 can be used for an individual. Obviously, it will need modification if the attorney-in-fact is an entity such as a corporation.
Pursuant to G.S. 47-18 and G.S. 47-20, the instrument must be recorded in the county where the land lies in order to be valid against lien creditors and purchasers for value. G.S. 47-115 provides that the deed or other instrument executed by the attorney- in-fact for the principal shall be indexed under the name of the principal (in this case, the corporation) and the name of the attorney-in-fact.
Please feel free to contact any of The Title
Company's attorneys for assistance in this area of the law. We can be
helpful in assuming certain underwriting risks when there is uncertainty
in a given case in this area.