Ratifying the Actions of the Power of Attorney or Guardian Even When Fraud is Alleged – (Part 2 of a 2 part series)

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Power of Attorney Lawyer

In our last blog, I highlighted the duty of the power of attorney or guardian over an incapacitated person.  It is a duty that cannot be taken lightly and can be abused.  In Estate of Barbara M. Frost, we saw how the agent and sole beneficiary of the estate, took out a reverse mortgage on Frost’s property for himself, yet Frost signed off on the reverse mortgage.  The agent, who held a durable power of attorney (POA) over Frost executed years previous, received advances on the reverse mortgage up until the day Frost died.

The half-sister who was disinherited under of Frost’s later will (by the influence of the Power of Attorney), contested the Estate and reverse mortgage in Probate Court as a product of undue influence.  She sought court declaration that the mortgage against Frost’s property was invalid because it was created through an invalid POA and it was the Agent who fraudulently requested the money, not Frost.  The bank sought declaratory judgment that the mortgage and note were valid.  Both parties cross-moved for summary judgment before the court.  The Probate Court and Appellate Court both held in favor of the bank, declaring that while the POA was invalid because it lacked certain statutory requirements, Frost’s initialing of the papers ratified the Agent’s actions in seeking the reverse mortgage.  Ratification occurs when a principal, with knowledge of material facts, demonstrates an intention to ratify the action by express words or conduct, or accepts the benefits of the action.  Here, the signature of Frost was sufficient to show her intent to ratify the agent’s action.  However, there was no evidence that showed that Frost ratified the wrongful taking of $208,000 in advances by the POA, so the Supreme Court reversed that part of the declaratory judgment.

This decision shows the power of a signature.  The court held that the signature of the principal alone is powerful enough to ratify his or her agent’s actions.  While the signature of the decedent could have been defeated, if the sister could show that she labored under the undue influence of the agent when signing of the document that evidence was never properly presented.  So the court held the signature was enough to ratify the loan, but limited the authority of the POA to the execution of the mortgage, not the advances the Agent then took.  As a power of attorney or guardian, if your principal is competent to sign off on legal documents, this fact is a good way to protect yourself from liability because it shows your principal wanted you to do whatever you did.  On the face of it, what the power of attorney did was reprehensible in taking the mortgage out on the house and advancing money to himself.  But because Frost signed off on the transaction, the court in this case recognized that Frost’s signature demonstrated her acquiescence to do what he did.  This decision doesn’t mean you can have your principal sign off on anything you do to make it legitimate.  But if you do something per the direction of the principal or do something that you think will help the principal, the principal’s signature certainly goes a long way to prove that what you did is what the principal wanted.

To discuss your NJ Power of Attorney matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.