In 2007, Richard Martin signed a Statutory Durable Power of Attorney naming his son, Ray, and his daughter, June, as joint agents. In 2008, June - without consulting Ray or getting his participation - had $25,000.00 worth of improvements made to Richard’s house. She withdrew the money to pay for these improvements from Richard’s bank account.
In 2009, June executed a contract selling Richard’s house in which he was the seller and June and her husband were the buyers. The contract price, which was less than the market value of the house, included a down payment of $15,000.00 and monthy installment payments. June and her husband moved into the house and lived in it thereafter.
On the same day as she executed the sales contract, June executed a warranty deed conveying the house from Richard to her and her husband. June also executed a release of lien on the house, discharging all debt against it for final payment on the house a few months before Richard died.
Richard, who had been living in a nursing home since 2007, died in 2011. Ray discovers what his sister had done after Richard has died. Ray is appointed as executor of his father’s estate. Can he do anything about what June has done?
Can Ray Recover the House from June?
Ray, as executor of the estate, can file a suit for breach of fiduciary duty against June. If it were not for June’s actions, Richard’s house would have been a part of the property of his estate. The purpose of Ray’s suit would be to get the property back into the estate, so that it can be divided in accordance with Richard’s will. In his will, Richard had provided that all his property was to be divided equally between Ray and June.
The court will look at the language in the POA to determine whether it allowed June to act independently of Ray. In this case, the POA the language requires that the two agents, June and Ray, have to act together.
June had acted unilaterally, which the POA did not allow her to do. She and Ray were joint agents with respect to the POA. That meant that they had to act together and be in agreement on any action taken based on its authority. In acting alone, June has breached fiduciary duty to her father. Because of that, the court can, and likely would, set aside all the transactions which were the result of June’s unilateral actions. That means that the contract of sale, the warranty deed and the release of lien will all be void. Based upon that finding, the court can order the house will come back into and be a part of the inventory of property being held in Richard’s estate.
Can Ray Recover Rent from June for Living in Richard’s House?
Ray can file a trespass to try title suit and ask the court to award the estate a sum of money that equals the amount of rent that June should have paid on the house while she and her husband were living on the property. He will need to present evidence to the court of the reasonable monthly amount a renter of a similar property would have been required to pay in the community in which the father’s house is located. Then he will need to present evidence of the number of months June and her husband had lived rent-free in the house.
Can Ray Recover Attorney’s Fees in His Suit Against June?
A court cannot award attorney’s fees to Ray unless he is entitled to them either by contract or by a statute. In the case of his claims for breach of fiduciary duty and trespass to try title, neither of these actions allows for attorney’s fees. Therefore, Ray cannot collect them. Unfortunately, this means there is not a complete recovery for June’s actions because the father’s estate will be out the money that Ray has to pay an attorney to bring the suit.
Could June and Ray Act Together Under the POS to Do What June Did Acting Alone?
Whether June and Ray could have sold Richard’s house to June for less than fair market value and then forgiven the debt if they had acted together depends upon whether the POA gives the agents the power to sell Richard’s property and, additionally, allows self-dealing on the part of the agents. Without a provision that self-dealing, the fiduciary responsibility they owe Richard as the principal will have forbidden it because an agent under a POA cannot personally benefit from any action taken.
Under a POA that allows selling of property but does not allow for self-dealing, they would have been limited to selling the house to June at fair market value and she would have been obligated to pay for the house under the contract of sale. In other words, they could not have released the lien on the house before Richard died.
Does June and Ray’s Authority Continue Under the POA After Their Father Dies?
From the moment of Richard’s death, the POA terminates and their power to act under it expires. Furthermore, Richard cannot take any action as executor of his father’s estate, even though he was named in the will as the person to be executor, until after: (1) an application to probate the will has been filed; (2) proper notices have been issued; (3) a hearing has been held in which the judge appoints him; and, (4) the clerk of the court has issued to him Letters Testamentary granting him authority to act.
Sandra W. Reed is an attorney with Katten & Benson, an Elder Law firm, whose principal office is in Fort Worth, Texas. She lives and practices in Somervell County. If you have questions or concerns, please contact her by email at email@example.com or by phone at 254.797.0211.