A durable power of attorney is a standard estate planning document. It is a powerful legal document that grants an agent broad authority to act on behalf of the principal.
Unfortunately, this type of document is often prone to fraud and abuse. The Gardner v. Majors, No. 10-21-00306-CV (Tex. Ct. App.–Waco 2023) case provides an example of this. The case is a dispute between co-owners of property when one of them forges a durable power of attorney to sell the property.
Facts & Procedural History
The case is an appeal involving an alleged fraudulent sale of property co-owned by Gardner and Gordon.
The case suggests that Gardner put up the money for the property, but took title jointly with Gordon.
Gardner alleged that Gordon forged a Durable Power of Attorney to sell the property without her consent, resulting in a fraudulent general warranty deed conveying the property to the Deffebachs.
Gardner filed a lawsuit for participatory liability, breach of fiduciary duty, negligence, civil conspiracy, and other charges.
Gordon denied Gardner’s allegations and filed a motion to dismiss under Rule 91a, raising a defense under Section 751.209 of the Texas Estates Code, which says that a purchaser can rely on a seemingly valid power of attorney form.
The trial court granted Gordon’s Rule 91a motion to dismiss, and Gardner appealed.
What is a Durable Power of Attorney?
In Texas, a durable power of attorney is a legal document that allows an individual (the “principal”) to appoint another person (the “agent” or “attorney-in-fact”) to make decisions on their behalf.
The durable power of attorney is “durable” because it remains in effect even if the principal becomes incapacitated.
The agent can be given broad or limited powers, depending on the wishes of the principal. These powers may include managing the principal’s finances, making healthcare decisions, and even selling or transferring property.
However, the agent is required to act in the best interests of the principal and to follow any specific instructions given in the durable power of attorney document. The Texas Estates Code includes provisions to prevent abuse of power by agents and to protect the interests of the principal.
Durable Power of Attorney for Real Estate
Section 752.102(a) of the Texas Estates Code outlines the powers granted to an agent regarding real property transactions in a statutory durable power of attorney.
This section provides the agent with broad authority to engage in various real estate transactions, such as acquiring or rejecting interests in real property, selling or exchanging property, managing or conserving real property, constructing or improving structures on real property, and entering into mineral transactions. Additionally, the agent has the power to designate the principal’s homestead and execute documents necessary to create a lien against the principal’s homestead or property owned by the principal’s spouse in which the principal has a homestead interest.
The code goes on to say that the language conferring such authority does not require further reference to a specific description of the real property, and these powers are granted to the agent unless otherwise limited or revoked by the principal in the durable power of attorney.
Reliance on Durable Power of Attorney
Texas Estates Code 751.209 provides the rule at issue in this case. It reads as follows:
GOOD FAITH RELIANCE ON DURABLE POWER OF ATTORNEY. (a) A person who in good faith accepts a durable power of attorney without actual knowledge that the signature of the principal or of another adult directed by the principal to sign the principal’s name as authorized by Section 751.0021 is not genuine may rely on the presumption under Section 751.0022 that the signature is genuine and that the power of attorney was properly executed.
(b) A person who in good faith accepts a durable power of attorney without actual knowledge that the power of attorney is void, invalid, or terminated, that the purported agent’s authority is void, invalid, or terminated, or that the agent is exceeding or improperly exercising the agent’s authority may rely on the power of attorney as if:
(1) the power of attorney were genuine, valid, and still in effect;
(2) the agent’s authority were genuine, valid, and still in effect; and
(3) the agent had not exceeded and had properly exercised the authority.
Thus, a person who accepts a durable power of attorney in good faith and without knowledge that the signature of the principal or the agent is not genuine, or that the power of attorney is void, invalid, or terminated, may rely on the power of attorney as if it were genuine, valid, and still in effect.
This law creates a presumption that the signature is genuine and the power of attorney was properly executed.
As noted in the appellate opinion, this provision is a defense. It requires the other party to put on evidence to rebut the presumption. This is what Gordon argued in this case, namely, that she was prohibited from putting on evidence to rebut the presumption given the court granting the motion to dismiss.
The appellate court agreed. It held that a motion to dismiss is not appropriate in this situation as one would have to consider the evidence, not just the pleadings. The motion to dismiss only focuses on the pleadings.
The Motion to Dismiss
A Rule 91a motion to dismiss is a procedure available under the Texas Rules of Civil Procedure that allows a party to seek dismissal of a claim or cause of action against them if the pleading fails to state a legally sufficient claim for relief.
The motion can be filed at any time after the suit is filed, and if granted, the court will dismiss the claim with prejudice, meaning the plaintiff cannot refile the claim. The purpose of the rule is to streamline the litigation process by providing a quick and efficient means of disposing of claims that have no basis in law or fact.
In this case, the defendant, Gordon, cited an affirmative defense in her motion to dismiss. The appellate court considered whether an affirmative defense could be cited in a motion to dismiss. The appellate court’s reasoning and holding are as follows:
The Court [in a separate case] further concluded that when “deciding a Rule 91a motion, a court may consider the defendant’s pleadings if doing so is necessary to make the legal determination of whether an affirmative defense is properly before the court.” Id. Therefore, “Rule 91a permits motions to dismiss based on affirmative defenses `if the allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought.'” Id. at 656 (citing TEX. R. CIV. P. 91a.1). Affirmative defenses that are not conclusively established by the facts in a plaintiff’s petition but require consideration of evidence are not a proper basis for a motion to dismiss “[b]ecause Rule 91a does not allow consideration of evidence.” Id. (holding that dismissal was proper under Rule 91a because allegations in Bethel’s petition showed that it was not entitled to relief).
The court then turned to Gardner, the plaintiff’s, pleadings to see if they state facts that would rebut the affirmative defense raised in the motion to dismiss.
Fair Notice Standard for Pleading
With respect to a Rule 91a motion to dismiss in Texas, the fair-notice standard is applied instead of the pleading requirements used in a Rule 12(b)(6) motion to dismiss in the federal system.
The fair-notice standard is a relatively liberal standard that requires a pleading to provide the opposing party with fair and adequate notice of the facts upon which the pleader bases their claims to enable the opposing party to prepare a defense or response.
The pleadings are construed liberally in favor of the plaintiff, and every fact will be supplied that can be reasonably inferred from what is specifically stated. The plaintiff is not required to set out in the pleadings the evidence upon which they rely to establish their asserted cause of action. However, the fair-notice standard cannot be used to read into a petition a claim that it does not contain.
In this case, the appellate court noted that the plaintiff, Gardner, had included sufficient facts in her pleading to state a claim. The evaluation of her claims and the affirmative defense would require a review of the evidence. This is beyond the scope of the motion to dismiss, which only looks at the pleadings and not the evidence.
The court suggests that summary judgment (after discovery) or a trial is the appropriate way for Gordon to have raised this issue. As such, the appellate court reversed the trial court.
A motion to dismiss is based on the pleadings. As long as the plaintiff pleads enough facts for a claim, the motion to dismiss cannot be based on an affirmative defense raised for the first time during the motion to dismiss. This same result can be had by filing a motion for summary judgment or with a trial.
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