Golleher v. Horton, 1

• Decision Date: 12 September 1985
• Docket Number: CA-CIV,No. 1,1
• Parties: Margaret Ruth GOLLEHER, individually and as Personal Representative of the Estate of Arthur Raymond Hunter, Jr., deceased, Plaintiff-Appellant, v. Mary B. Martin HORTON and Herschel Horton, wife and husband; Joseph William Hunter and Victoria Hunter, husband and wife; Margaret Louise Hunter Haus, a single woman; Jennie Barbara Hunter Sandoz, a single woman; Phylis Mildred Hunter Garner, a single woman; A.R. Hunter, Sr., and Molly Hunter, husband and wife; Hunter Holding Corporation, an Arizona corporation; John Does 1-10; Jane Does 1-10; Black Corporations 1-10 and White Corporations 1-10; Correne Kelly, Defendants-Appellees. 7006.
• Court: Arizona Court of Appeals

Page 1225

715 P.2d 1225

148 Ariz. 537

Margaret Ruth GOLLEHER, individually and as Personal Representative of the Estate of Arthur Raymond Hunter, Jr., deceased, Plaintiff-Appellant, v. Mary B. Martin HORTON and Herschel Horton, wife and husband; Joseph William Hunter and Victoria Hunter, husband and wife; Margaret Louise Hunter Haus, a single woman; Jennie Barbara Hunter Sandoz, a single woman; Phylis Mildred Hunter Garner, a single woman; A.R. Hunter, Sr., and Molly Hunter, husband and wife; Hunter Holding Corporation, an Arizona corporation; John Does 1-10; Jane Does 1-10; Black Corporations 1-10 and White Corporations 1-10; Correne Kelly, Defendants-Appellees.

No. 1 CA-CIV 7006.

Court of Appeals of Arizona,

Division 1, Department C.

Sept. 12, 1985.

Reconsideration Denied Nov. 18, 1985.

Review Denied March 13, 1986.

Hocker & Axford, P.C. by R. Kelly Hocker, Tempe, for plaintiff-appellant.

Lewis and Roca by John P. Frank, Charles Crehore and George L. Paul, Phoenix, for defendants-appellees.

EUBANK, Judge.

Margaret Ruth Golleher (Ruth), daughter of the deceased Arthur Ray Hunter, Jr. and the personal representative of his estate, brought suit in 1974 against various members of her father's family. She alleged that they had wrongfully deprived him of certain property. The suit was dismissed in 1976 for discovery violations but the dismissal was reversed by this court in Golleher v. Horton, 119 Ariz. 604, 583 P.2d 260 (App.1978). Following remand, a jury trial was held and at the close of the plaintiff's case the court directed a verdict in favor of the defendants on two issues. Following the conclusion of the evidence, the court directed a verdict in favor of defendants on all of the remaining issues. Ruth filed a timely notice of appeal from the judgment entered on January 4, 1983.

The facts pertinent to this appeal are as follows. Arthur Ray Hunter, Jr. (Ray) had numerous medical problems many of which were related to excessive drinking. Following his hospitalization for an acute alcoholic Ruth challenged Mary's use of the power of attorney in 1966 to terminate Trust 1722, a real estate holding trust of which Ray was a named beneficiary. She also contested Mary's transfer of 160 acres of unimproved desert land located near Buckeye from Ray to the Hunter Holding Corporation, an entity comprised of Ray's brothers and sisters. Ruth contended that her father was incompetent before and after he signed the power of attorney, making both transactions void. She also alleged that her aunts and uncles defrauded her father and exercised undue influence over him. On that basis she sought to have a constructive trust imposed upon the properties in question.

episode in 1964, Ray executed a general power of attorney to his sister, Mary Martin Horton (Mary). On November 30, 1964 Ray suffered a stroke which left him partially paralyzed and almost completely aphasic. Mary used the power of attorney to carry out several transactions prior to Ray's death in 1973. Two of those transactions are challenged in this lawsuit.

On appeal Ruth contends that the trial court erred because factual issues precluded directed verdicts on the issues of (1) her father's competency, and (2) alleged fraud or undue influence involving the termination of Trust 1722 and the transfer of the Buckeye property. She also contends that it was reversible error for the court to refuse to disqualify appellees' trial attorney.

Prior to addressing these arguments, we note that in reviewing an appeal from a directed verdict this court must consider the evidence in a light most favorable to the party opposing that motion, including all reasonable inferences to be drawn from such evidence. Rocky Mountain Fire and Cas. Co. v. Biddulph Oldsmobile, 131 Ariz. 289, 292, 640 P.2d 851, 854 (1982); Gibson v. Boyle, 139 Ariz. 512, 518, 679 P.2d 535, 541 (App.1983).

COMPETENCY

We first consider whether the jury was presented with any evidence from which reasonable minds could conclude that Ray was incompetent at times pertinent to the disputed transactions. At trial the parties defined those pertinent times as September 29, 1964, when Ray executed the power of attorney and after Ray suffered a stroke on November 30, 1964.

In urging their motion for a directed verdict defendant-appellees argued that the standard for determining Ray's competence was the standard used for testamentary capacity, i.e. did he understand the nature of his act, the nature or character of his property and the natural objects of his bounty. See Vermeersch's Estate, 109 Ariz. 125, 128, 506 P.2d 256, 259 (1973); Weil's Estate, 21 Ariz.App. 278, 281, 518 P.2d 995, 998 (1974). However, on appeal they argue that the test is "whether a person is capable of understanding in a reasonable manner, the nature and effect of the act in which the person is engaged", citing Estate of Head, 94 N.M. 656, 615 P.2d 271 (1980); Estate of Taggart, 95 N.M. 117, 619 P.2d 562 (1980); Roybal v. Morris, 100 N.M. 305, 669 P.2d 1100 (N.M.App.1983).

Ruth argues that the appropriate test to determine whether her father was competent to execute the power of attorney was whether he was able to properly manage and take care of himself. She argues that this test is akin to the test for the capacity to contract (the "unsound mind" standard for purposes of A.R.S. § 12-502 (incapacity for purposes of tolling the statute of limitations for commencing a lawsuit)), and capacity for purposes of establishing a guardianship pursuant to A.R.S. § 14-5101. She has not directed us to authorities dealing specifically with competency required in executing a power of attorney.

We find no Arizona cases defining the competence required of a party executing a power of attorney. However, the execution of a power of attorney creates a principal-agency relationship. See, e.g., Delos v. Farmers Ins. Group, Inc., 93 Cal.App.3rd 642, 656, 155 Cal.Rptr. 843, 851 (1979); Kline v. Orebaugh, 214 Kan. 207, 210, 519 P.2d 691, 695 (1974); Mehus's Estate, 278 N.W.2d 625, 629 (N.D.1979). We therefore The Restatement (Second) of Agency § 20 (1958) provides:

find general principal-agency law to be applicable.

A person who has capacity to affect his legal relations by giving consent to a delegable act or transaction has capacity to authorize an agent to do such act or to conduct such transaction for him with the same effect as if he were to act in person.

Comment (c) to § 20 provides:

[P]ersons lacking full capacity because of mental defects are affected by acts done on their account by a person whom they direct so to act, to the extent to which they have capacity to give consent and become parties to the transaction.

The above provisions indicate that if a principal has the capacity to do the act which he has delegated to another (through a power of attorney or otherwise), the delegation is valid. This principle has been applied by some courts in evaluating the validity of a power of attorney. See Beaucar v. Bristol Fed. Sav. & Loan Ass'n, 6 Conn.Cir. 148, 158, 268 A.2d 679, 687 (1969); In Re Dean, 167 Pa.Super. 92, 100, 74 A.2d 538, 541 (1950). See generally 3 Am.Jur.2d Agency § 12 (1962). This position is an apparent recognition that capacity may vary with the complexity of the delegable act, e.g., a simple sale of an item of personal property requires less competency than conducting an intricate business transaction. Cf. Restatement (Second) of Agency § 122, Comment d (1958).

The powers conveyed by a power of attorney may be limited in scope (special) or, as in the document at issue, may grant broad powers (general) enabling the agent to conduct a variety of legal transactions. Consistent with the Restatement position, it might appear that the requisite capacity for granting the power is dependent upon whether the principal had capacity to perform each of the transactions which the attorney-in-fact is authorized to perform. However, it would be cumbersome for courts to determine whether the grantor of the power met different competency tests to perform the various transactions authorized by a general power of attorney.

Our legislature has expressly authorized the use of durable powers of attorney which by their own terms survive the disability of the principal. See A.R.S. § 14-5501. The legislature has further provided that an agent who acts without actual knowledge of the incompetence of his principal pursuant to a non-durable power of attorney nevertheless binds the principal. A.R.S. § 14-5502. ¹ These enactments reflect preference for a policy facilitating the use of powers of attorney without inquiry regarding the principal's competency to enter each transaction for which it is used. See also R.W. Effland, Caring for the Elderly Under the Uniform Probate Code, 17 Arizona L. Rev. 373, 374, n. 5, 408-411 (1975). We do not imply that a challenge is precluded on grounds of competency to specific uses of the power. However, we reject a test for the capacity to execute a general power of attorney that would require inquiry into each potential transaction which it authorizes.

Decisions in other jurisdictions generally focus on the grantor's ability to understand the general nature of the document he is executing rather than his competency to perform the acts included in the power of attorney. See Roybal v. Morris, 669 P.2d at 1104; Umsheid v. Simnacher, 106 A.D.2d 380, 482 N.Y.S.2d 295, 298, (2 Dept.1984); Tomlinson v. Jones, 677 S.W.2d 490, 492 (Tex.1984). We have found one decision equating the capacity to grant a power of attorney with the capacity to contract. See Beaucar v. Bristol Fed. Sav. & Loan Ass'n., 6 Conn.Cir. at 158, 268 A.2d at 687. But see Restatement (2nd) of Agency § 20, Comment b (1958). Cf. Cote v. A.J. Bayless Markets, Inc., 128 Ariz. 438, 444, 626 P.2d 602, 608 (App.1981). We are persuaded that the better test is whether the person is capable of understanding in a reasonable manner, the nature and effect of his act.

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