We receive a significant number of inquiries concerning instruments found in the chain of title during a title examination that appear to be gift deeds executed by an attorney-in-fact. There seems to be sufficient interest in this issue to warrant a revisit of the topic. In 1997, the Supreme Court of North Carolina came out with a definitive, first impression, decision on the authority of an attorney-in-fact to make gifts of real estate on behalf of the principal, Whitford v. Gaskill, 345 N.C. 475, 480 S.E.2d 690, (1997).
In 1988, George W. Pittman, Jr. met with an attorney and executed a power of attorney giving his wife, Rose Lupton Pittman, authority to act on his behalf, including the power to transfer real property. The power of attorney varied from the statutory short-form power of attorney set forth in N.C.G.S. § 32A-1. It stated that Mrs. Pittman had 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."
Shortly thereafter, Mrs. Pittman signed a deed at the direction of Mr. Pittman, in the presence of both Mr. Pittman and a notary public. The deed conveyed property from Mr. Pittman to Mr. Pittman's sisters, Dessie Pittman Gaskill and Alice Pittman Lewis Durham, the defendants. The deed was subsequently recorded and delivered to the defendants. At the time of delivery, the property was worth $75,000. The defendants did not pay any consideration for the property. Mr. Pittman died intestate and plaintiff, Mr. Pittman's daughter, would have been otherwise entitled to inherit a one-half undivided interest in the property.
In 1990, plaintiff initiated this action alleging that the deed to the defendants, signed by Mrs. Pittman as attorney-in-fact for Mr. Pittman, was void. The trial court granted partial summary judgment in plaintiff's favor, after finding that the deed signed by Mrs. Pittman was void and of no effect. On appeal, the Court of Appeals affirmed the trial court and held that an attorney-in-fact may not convey real property by gift unless the power of attorney expressly confers the authority to make gifts of real property. Whitford v. Gaskill, 119 N.C.App. 790, 792, 460 S.E.2d 346, 347 (1995). The defendants appealed.
The Supreme Court opinion dealt with two main issues. First, does an attorney-in-fact have the authority to make gifts of real property on behalf of the principal if not expressly authorized to do so in the power of attorney? Second, if specific authorization is required, is the word "transfer," when added to the standard wording of the statutory short-form power of attorney, sufficient to confer such authority to make gifts of real property?
Citing Annotation, Power of attorney as authorizing gift or conveyance or transfer without a present consideration, 73 A.L.R. 884 (1931) Johnson v. Fraccacreta, 348 So.2d 570 (Fla.Dist.Ct.App.1977); King v. Bankerd, 303 Md. 98, 492 A.2d 608 (1985); and Brown v. Laird, 134 Or. 150, 291 P. 352 (1930), the Whitford Court stated that " ... in accord with the majority of jurisdictions which have considered this issue, we hold that 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. Accordingly, the power of attorney set forth in N.C.G.S. § 32A-1 and the powers granted attorneys-in-fact by N.C.G.S. § 32A-2(1), standing alone, do not authorize an attorney-in-fact to make gifts of the principal's real property."
The Whitford Court then dealt with the issue of whether the word "transfer" was a sufficient modification to the statutory form in order to grant the necessary authority. The court determined that it was by relying on the definition set forth in Webster's Third New International Dictionary 2427 (1976) and Black's Law Dictionary 1497 (6th ed. 1990). The Court stated that "The common thread connecting each of these definitions is that the word "transfer" is a word ordinarily used to represent a conveyance of property by sale or by gift."
In 1995, the North Carolina legislature amended N.C.G. S. §§ 32A-1 and 32A-2. The amendment adds a section to the statutory short-form power of attorney giving the principal the ability in the form to grant the attorney-in-fact the authority to make gifts to individuals and charities in accordance with the principal's personal history of giving gifts. Interestingly, the Whitford Court, in noting the amendment stated that it "...does not affect our decision as it relates to general powers of attorney executed prior to the effective date of the amendment nor does it affect our decision as it relates to the attorney-in-fact's authority to make gifts subsequent to the amendment where there is no personal history of gift-giving." It would seem that a clear inference could be drawn when a title examination does not disclose any previous gift deeds, and that there is no history of giving gifts to meet the threshold requirement of the statute. The "history" requirement is probably unnecessary as being too protective since the required act of initialing the power should be sufficient to demonstrate the principals intent to grant a broad power. In light of the language in this case and in amended N.C.G.S. §§ 32A-1 and 32A-2, it would seem prudent for practitioners drafting these instruments to consider modifying the statutory form to clearly express their clients intentions.
It is important to note that the Whitford Court specifically ruled that a "broad general power of attorney" does not carry with it any power to make gifts. We are frequently presented with powers that include the authority to "perform all and every act and thing whatsoever necessary to be done in carrying out the provisions, purpose and intent of this instrument as fully as I might or could do if personally present, hereby ratifying and confirming all that my said attorney shall lawfully do or cause to be done by virtue of this Power of Attorney." It has been argued that the agent steps in the shoes of the principal under this language and therefore has unlimited authority. We would agree that the drafter of the instrument containing such language probably intended such an interpretation. However, Honeycutt v. Farmers & Merchants Bank, 126 N.C.App. 816, 487 S.E.2d 166 (1997), declares otherwise. This court following Whitford, determined that they "must examine the power of attorney to determine whether it provided express authority for Honeycutt to make a gift of Mrs. Newsome's property. The power of attorney in question grants Honeycutt broad authority to "perform all and every act and thing whatsoever necessary to be done in carrying out the provisions, purpose and intent of this instrument as fully as I might or could do if personally present, hereby ratifying and confirming all that my said attorney shall lawfully do or cause to be done by virtue of this Power of Attorney." However, this provision does not authorize Honeycutt to make a gift of Mrs. Newsome's property to anyone, much less herself. Therefore, we find that Honeycutt lacked authority under the power of attorney to make a gift of Mrs. Newsome's property to herself." The rationale of these decisions is that since a gift may "potentially" be contrary to the principals interests, and therefore a violation of the agents fiduciary obligation, the grant of authority must be "express".
Whitford has been construed recently in Hutchins v. Dowell , COA99-799, (2000). One issue decided in Hutchins is whether Whitford applies retroactively. The Hutchins court had little difficulty determining that "the defendants have provided no compelling reason why Whitford should be applied prospectively only. Moreover, even in the absence of Whitford, plaintiff here was entitled to summary judgment as a matter of law." Summary judgment in this case involved the setting aside of a gift deed executed by an attorney-in-fact in favor of herself.
This points out a serious concern for title examiners with respect to such conveyances. The Whitford trial court and the Court of Appeals found that there was no authority in the agent and therefore, the deed was "void and of no effect", Whitford v. Gaskill, 119 N.C.App. 790, 460 S.E.2d 346 (1995). The North Carolina Supreme Court ruled that "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. Accordingly, the power of attorney set forth in N.C.G.S. § 32A-1 and the powers granted attorneys-in-fact by N.C.G.S. § 32A-2(1), standing alone, do not authorize an attorney-in-fact to make gifts of the principal's real property." Since the Court went on to find that there was express authority in the instrument granting the power, they did not need to address whether the deed was void or voidable. This is an important distinction. "A voidable deed is sufficient to pass title to a bona fide purchaser for value, but a void deed is not." Beam v. Almond, 271 N.C. 509, 520, 157 S.E.2d 215, 224 (1967). Our courts have also stated that assuming "the deed to be voidable, the possession under it, as color of title merely, in the absence of any indication of imperfection or infirmity apparent upon its face, would ripen into a good title after the expiration of seven years". Ellington v. Ellington, 103 N.C. 54, 9 S.E. 208 (1889). Clearly, if such deeds as we are discussing were voidable, they could be insurable with the passage of time and circumstance.
Unfortunately, we are drawn to the conclusion that a gift deed by an attorney-in-fact is void. See: Moore v. Smith, 33 N.C.App. 275, 235 S.E.2d 102, (1977). This of course, begs the question concerning deeds that do not cite that they are gift deeds, recite consideration, but do not evidence payment of the excise tax. Chicago Title Ins. Co. v. Wetherington, 127 N.C.App. 457, 490 S.E.2d 593, (1997), contains a recent recital of the presumption that matters stated in a deed are true. This presumption is rebuttable. The lack of evidence of payment of the excise tax, coupled with a great disparity between the stated consideration and the actual value, has been found sufficient to rebut the presumption, Patterson v. Wachovia Bank & Trust Co., N.A., 315 S.E.2d 781, 68 N.C.App. 609 (1984).
Where does this leave the title examiner that finds a deed from an attorney-in-fact conveying the principals real property to the attorney in fact and/or any third party together with evidence of a lack of consideration? We believe that this constitutes a cloud on the title that may need to be removed. Often these transactions are part of a planning process for the orderly disposition of older individuals with failing health. In such cases, the principal may be deceased when the problem is discovered. If the grantees of the deed are identical to the heirs inheriting real property when this occurs, the title problem is self-curing. When the grantees and the heirs are not the same people, a non-warranty or quit claim deed will cure the defect if the heirs are willing. If any of the heirs are minors, a special proceeding must be filed and an order of sale or mortgage confirmed by a Superior Court judge upon a finding that it is in the minors best interest. If the principal is still living, but incompetent, the attorney-in-fact can still act in their behalf. The closing attorney should insure that the proceeds are clearly payable to or for the benefit of the principal. This is particularly true when a mortgage of the principals property is involved. It is well established in North Carolina that a mortgage of a principals property to secure a loan to the attorney-in-fact is unenforceable.