Bulletin: NE2016003

Dear Associates: 

A decision recently released by the Nebraska Supreme Court, Cisneros v. Graham, 294 Neb. 83 (2016) provides clear guidance in the area of interpreting Powers of Attorney in the area of self-dealing by the attorney in fact/agent. The case involves personal property, but can be applied to circumstances when real property is at stake.

Cisneros was the beneficiary of a certificate of deposit belonging to Hilda Graham. Hilda, a terminally ill, elderly woman, appointed Gregory Graham, her deceased husband’s nephew, attorney in fact/agent for the purpose of administering Hilda’s certificate of deposit and a checking account which was owned by each of the Grahams with rights of survivorship. The balance of that account became Gregory’s property at the time of Hilda’s death.  At one point, prior to Hilda’s death, Gregory withdrew a portion of the value of the certificate of deposit and deposited funds in the joint checking account, thus creating an interest in those funds in himself.

The document creating the power of attorney gave Gregory broad powers over Hilda’s financial affairs, but did not specifically grant her attorney in fact/agent authority to convey, or create any interest in, her property. Under Nebraska law, no such specific grant of authority is necessary if the attorney in fact/agent is an issue, spouse or descendant of the Principal. Being a nephew-in-law, Gregory was none of these, and the transfer to the joint checking account was invalidated in a proceeding, on a theory of constructive fraud, brought by the named beneficiary of the certificate of deposit. The Court doesn’t go into much detail regarding the final fate of the funds deposited into the checking account, but Cisneros, the CD beneficiary, was granted a judgment approaching $60,000.00 plus interest, a trial court decision which the Supreme Court affirmed.

Nebraska adopted the Uniform Power of Attorney Act, effective January 1, 2013, as the Nebraska Uniform Power of Attorney Act (NUPOAA). The Court found that the power of attorney was therefore subject to the terms of NUPOAA, but, additionally, that pre-2013 case law also was relevant to this matter, since the case law was not inconsistent with NUPOAA.

The lesson to be derived is that, whenever we have an indication that a pending transaction is to be by an attorney in fact/agent, for the attorney in fact/agent, the power of attorney must be carefully reviewed for express authority for such a transaction, and careful inquiry must be made into the relationship between the principal and the attorney in fact/agent, with the assistance of an underwriter.

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