Aiello v. Clark

• Decision Date: 06 April 1984
• Docket Number: No. 7468,7468
• Citation: 680 P.2d 1162
• Parties: Donna Louise AIELLO, Appellant, v. Ray CLARK and Joyce Clark, Appellees.
• Court: Alaska Supreme Court

Page 1162

680 P.2d 1162

Donna Louise AIELLO, Appellant, v. Ray CLARK and Joyce Clark, Appellees.

No. 7468.

Supreme Court of Alaska.

April 6, 1984.

As Modified May 8, 1984.

Andrew J. Kleinfeld, Fairbanks, for appellant.

Daniel T. Saluri, Fairbanks, for appellees.

Before BURKE, C.J., and RABINOWITZ, MATTHEWS, COMPTON and MOORE, JJ.

OPINION

MOORE, Justice.

Donna Aiello, individually and as co-conservator of the estate of Fern Palfy, appeals the judgment of the superior court refusing to set aside an Assignment of Beneficial Interest or, in the alternative, award damages. Palfy purported to act for herself and as attorney in fact for Aiello in assigning a note which they held as joint tenants. Aiello alleges that the assignment was beyond Palfy's general power of attorney and in violation of the Palfy Family Trust. We agree and reverse the judgment of the superior court.

I. Factual Background

Raymond Clark and Donna Aiello are the son and daughter of Fern Palfy. Donna Aiello (Aiello) signed a "General Power of Attorney" on September 9, 1968 and another one on April 16, 1974 making Fern Palfy her attorney in fact at all material times. During the mid-1970s Palfy conveyed a great deal of property to Aiello; however, through her power of attorney, she retained use of the property and proceeds from sales of property. On March 24, 1976 Palfy sold a piece of real estate known as the brewery property to Daniel and Josephine Gaudiane. The subject promissory note (Gaudiane note) and deed of trust were executed giving Palfy and Aiello undivided half interests with the right of survivorship in the lien on the brewery property. Aiello had no direct input concerning the terms, conditions or decisions to sell in the property transactions of which she was a beneficiary. However, she was one of the payees on the Gaudiane note and a named beneficiary under the deed of trust. She was also very active in the efforts to collect the outstanding debt.

On October 20, 1976 Palfy created a trust to hold the Gaudiane note and other property. Palfy was Trustor of "The Palfy Family Trust." Palfy and Aiello were named as Co-Trustees. Fern Palfy was to be the trust beneficiary during her life. Upon her death, Donna Aiello, as trustee, was to distribute Palfy's residence to Ray Clark and his daughter Joyce and the remainder of the Trust property to herself. The property placed in the Trust, to the extent it still exists, is administered pursuant to the Trust Agreement.

On April 21, 1979, Palfy, purporting to act individually and as attorney in fact for Aiello, signed an Assignment of Beneficial Interest. The assignment attempted to transfer the Gaudiane note from Palfy and Aiello to Ray and Joyce Clark. Daniel Gaudiane and Attorney Eugene Belland jointly prepared the documents. Palfy signed the instrument in the presence of Gaudiane and his notary friend, John Rowlett.

Under the assignment, Palfy retained a life estate and the Clarks took the remainder interest. Aiello was completely divested of her interest. According to the instrument, the assignment was "in consideration of love and affection, and other good and valuable considerations, in hand paid ..."

Clark testified that Palfy told him she was "going to do it for what she owed me money she owed...." However, Clark regarded the promissory notes representing the money owed as outstanding, and therefore, he did not release Palfy from the obligations in consideration of the interest in the Gaudiane note. Furthermore, Clark testified he did not learn of the assignment until April 30, 1979 and testified he did not pay anything for it at that or any other time.

Aiello revoked the powers of attorney in August 1979 when she learned Palfy had granted Gaudiane a two-year extension on the note, which was at that time $12,000 in arrears. ¹

Aiello testified she did not learn of the assignment to the Clarks until October 1981. On May 8, 1979, just a week after he first learned of the assignment, Clark testified that he told Aiello about the assignment. She testified that he did not explain the transaction to her. Neither Clark nor Palfy (nor anyone else) ever sent Aiello a copy of the assignment or any written notice of the termination of her interest. ² On April 13, 1982, six months after learning of the assignment, Aiello filed suit individually and as co-conservator of the estate of Fern Palfy, against the Clarks. ³

II. Powers of Attorney

Aiello argues that Palfy, under the provisions of the powers of attorney acted outside the scope of her authority when she made a gift of Aiello's half interest in the Gaudiane note to the Clarks without her knowledge or consent. The Clarks argue that the powers of attorney were held by Palfy to protect her equitable interest in the property and, as such, a gift was authorized. They further argue that Aiello had no more than bare legal title, and thus no agency relationship was ever created.

The powers of attorney granted by Aiello in 1968 and 1974 were general. These were not granted in consideration of being named as payee on the Gaudiane note in 1976. The instruments creating the relationship must be taken as prima facie evidence of its nature. "The intention of the donor or grantor is to be gathered from the instrument of creation." Brown v. Laird, 291 P. 352, 353 (Or.1930) citing 49 C.J. §§ 34, 40. See also 72 C.J.S. Powers § 22 (1951). Beyond this, the burden is on the contestant to show that a different type of association or purpose exists. This burden was not met. Thus, Aiello's intention must be gleaned from the written grant of power as a reasonable person reading the instrument would interpret it. In 1968, Aiello granted Palfy power to:

lease, ... bargain, sell ... lands ... upon such terms ... as she shall think fit. Also to bargain and agree for, buy, sell, mortgage, hypothecate, and in any and every way and manner deal in and with ... other property ... and to make, do and transact all and every kind of business of what nature and kind soever.

Expressions such as "and otherwise dispose of" are catchall phrases and add nothing for they refer "to such undescribed methods of disposition as may have been omitted (but were not) and are in nature like those specifically enumerated." Fujino v. Clark, 71 F.Supp. 1, 4 (D. Hawaii 1947). The powers of attorney held by Palfy contained phrases of the same nature (see above); however, these phrases do not transform the power granted to include making gifts.

The general rule of construction is stated in Brown v. Laird, 291 P. at 354 deferring to Gouldy v. Metcalf, 75 Tex. 455, 12 S.W. 830, 831 (1889):

The language used in the grant of general power is certainly very comprehensive, but the established rule of construction limits the authority derived by the general grant of power to the acts authorized by the language employed in granting the special powers.

In Gouldy, the Texas Court further stated that:

When an authority is conferred upon an agent by a formal instrument, as by a power of attorney, there are two rules of construction to be carefully attended to: (1) The meaning of general words in the instrument will be restricted by the context, and construed accordingly. (2) The authority will be construed strictly, so as to exclude the exercise of any power which is not warranted either by the actual terms used, or as a necessary means of executing the authority with effect.

12 S.W. at 831

Thus, the authority to deal "upon such terms as she shall think fit" does not alter the type of acts which are authorized.

A general power of attorney authorizing an agent to sell and convey property, even though it authorizes him to sell for such price and on such terms as to him shall seem proper, implies a sale for the benefit of the principal, and does not authorize the agent to make a gift of the property, or to convey or transfer it without a present consideration inuring to the principal.

Hodges v. Surratt, 366 So.2d 768, 773-74 (Fla.Dist.Ct.App.1979) quoting Johnson v. Fraccacreta, 348 So.2d 570, 572 (Fla.Dist.Ct.App.1977).

The terms of the powers of attorney granted to Palfy were general though limited to business transactions. Consistent with that, Palfy had on all prior occasions received valuable consideration in Aiello's behalf for transfers she made as Aiello's attorney in fact. As the court said in Fujino, 71 F.Supp. at 4, "[a] gift is not a business transaction." Furthermore, 72 C.J.S. Powers § 25 (1951) states: "Gifts. Power to sell does not include authority to make a gift of the subject matter, or convey it without consideration, and such a transfer is void." See also Brown v. Laird, 291 P. 352, 354 (Or.1930).

In the absence of express authority to make a gift, none may be made. The agent must avoid acting to the detriment of his principal "in the absence of an explicit direction." Estate of Rolater, 542 P.2d 219, 223 (Okla.App.1975).

Clark relies upon the case of Clay v. Saute, 295 P.2d 914 (Cal.App.1956) for the proposition that the agent may make a gift where the principal holds bare legal title and the agent holds equitable title. Clay is distinguishable from this case. In Clay, the agent conveyed property to his daughter in order to deprive his business associates and creditors of access to his assets. His daughter never knew about these transfers and there is no evidence that she held any beneficial interest. The agent was declared incompetent, although he was not, and was later determined to be competent.

To the contrary, in this case, Aiello was holder of a beneficial interest in the promissory note and deed of trust and was informed of most of her interests although she was not active in the transactions. Palfy's apparent purpose in placing title in Aiello's name was not to evade creditors but rather to give her daughter a beneficial interest in the property which would become hers at Palfy's death, or when Palfy could no longer exercise the power of attorney.

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