Opinion
NO. 2011-CA-002163-MR
02-08-2013
DAVID WAYNE HULL APPELLANT v. CITIFINANCIAL SERVICES, INC. AND YVONNE STANLEY APPELLEES
BRIEFS FOR APPELLANT: John C. Collins Jennifer L. Conner Salyersville, Kentucky BRIEF FOR APPELLEE CITIFINANCIAL SERVICES, INC.: Douglas T. Logsdon Lexington, Kentucky NO BRIEF FILED FOR APPELLEE YVONNE STANLEY
NOT TO BE PUBLISHED
APPEAL FROM MORGAN CIRCUIT COURT
HONORABLE REBECCA K. PHILLIPS, JUDGE
ACTION NO. 09-CI-00234
OPINION
AFFIRMING
BEFORE: ACREE, CHIEF JUDGE; MOORE AND THOMPSON, JUDGES. THOMPSON, JUDGE: David Hull appeals from a summary judgment granted by the Morgan Circuit Court to Citifinancial Services, Inc. Hull contends that Citifinancial had a duty to investigate whether his power of attorney had been revoked before extending a loan to his former wife.
Hull has been an inmate in a Kentucky federal prison since 2003. Prior to his incarceration, he was a resident of Washington, Pennsylvania. In 2006, he granted his power of attorney to Yvonne Stanley, his fiancée, to enable her to sell some property he owned in Pennsylvania and to oversee his affairs while he was in prison. The power of attorney was created under Pennsylvania law and recorded in Washington, Pennsylvania on January 30, 2006. It expressly authorized Yvonne to buy, sell and mortgage property in his name.
In accordance with David's wishes, Yvonne sold his property in Pennsylvania and used the proceeds to purchase a farm in Morgan County, Kentucky. She also named herself as a joint owner on the deed, without David's permission. The deed and the Pennsylvania power of attorney were both recorded in the Morgan County Court Clerk's office on March 8, 2006.
David and Yvonne were married on August 28, 2006. On March 1, 2007, David contacted Yvonne and verbally revoked the power of attorney. He also executed a written revocation that was recorded in Washington, Pennsylvania on September 24, 2008.
The marriage was later annulled.
On April 3, 2009, without David's permission or knowledge, Yvonne borrowed approximately $49,000 from Citifinancial secured by a mortgage on the Morgan County property. Yvonne signed the mortgage pursuant to the power of attorney. Later that month, on April 16, 2009, the revocation of power of attorney was forwarded from Pennsylvania and recorded in the Morgan County Court Clerk's office.
On October 2, 2009, David filed a complaint with the Morgan Circuit Court against Yvonne and Citifinancial. He requested the court to order a full accounting from Yvonne of the expenditure of the monies placed in her care while she held his power of attorney, to order the property purchased in Morgan County to be declared his sole property, and to declare the mortgage executed by Yvonne null and void.
On November 9, 2011, the trial court entered a summary judgment only as to Citifinancial, holding that the mortgage constitutes a valid lien on the Morgan County property. David's claims against Yvonne remained pending. This appeal followed.
The standard of review on appeal of a summary judgment is "whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App. 1996).
In granting summary judgment, the trial court noted that, in order for the revocation of a power of attorney to become effective, the provisions of Kentucky Revised Statutes (KRS) KRS 382.110 and 382.370 require a written and executed revocation to be recorded in the county clerk's office. Because the revocation in this case was not filed until after the mortgage was executed, the court concluded that the power of attorney remained in effect and the mortgage was valid.
Kentucky Revised Statutes (KRS) 382.370 provides as follows:
Powers of attorney to convey or release real or personal property, or any interest therein, may be acknowledged, proved and recorded in the proper office, in the manner prescribed for recording conveyances. If the conveyance made under a power, is required by law to be recorded or lodged for record, to make the same valid against creditors and purchasers, then the power must be lodged or recorded in like manner, and no such power so recorded shall be deemed to be revoked by any act of the party by whom it was executed, except from the time when there has been lodged for record in the office in which the power is recorded a written revocation, executed and proved or acknowledged in the manner prescribed for conveyances, or a memorandum of revocation made on the margin of the record thereof, which memorandum is signed by the party executing the same, and attested by the clerk.
KRS 382.110(1) provides that "[a]ll deeds, mortgages and other instruments required by law to be recorded to be effectual against purchasers without notice, or creditors, shall be recorded in the county clerk's office of the county in which the property conveyed, or the greater part thereof, is located."
Thus, the trial court correctly ruled that the power of attorney filed in the Morgan County Court Clerk's office remained valid until the written revocation was filed on April 16, 2009. David does not dispute that the Pennsylvania power of attorney was validly recorded in the Morgan County Court Clerk's office, nor does he contest that the power of attorney was valid to effectuate the purchase of the Morgan County property, except insofar as Yvonne also placed her name on the deed without his permission.
David does contend, however, that Citifinancial had a duty to check whether his power of attorney had been revoked in Pennsylvania before extending the loan to Yvonne. Because the power of attorney was notarized in Pennsylvania and bore a filing stamp from the clerk's office there, he contends that Citifinancial was placed on notice to investigate whether a revocation had been filed in that state.
It is the policy of the law that deeds to real estate should be made a matter of record. Where an owner fails to record his deed, there is a presumption that a subsequent purchaser who buys the property and pays for it has no notice of an infirmity in the title; and unless there is substantial proof of facts which would put a reasonable man on notice, the subsequent purchaser has the better right.McKinney v. Fox, 305 Ky. 659, 661, 205 S.W.2d 315, 316 (1947) (internal citation omitted).
The fact that David's power of attorney was initially notarized and filed in Pennsylvania does not constitute the type of evidence that would put a reasonable person on notice that a revocation might have occurred in that state. David relies on Cable Piano Co. v. Lewis, 195 Ky. 666, 243 S.W. 924 (1922) to argue otherwise. In that case, the court held that a chattel mortgage on a piano that was recorded in Georgia was valid in Kentucky against a subsequent bona fide purchaser without notice. But, as Citifinancial argues, Kentucky law requires that a document relating to title to real property be recorded in the clerk's office of the county where the property is located in order to constitute notice to subsequent purchasers. There is no equivalent requirement for chattel liens. David's power of attorney was properly recorded in Kentucky in accordance with the pertinent statutes, and third parties, including Citifinancial, had a right to rely on it. Once such a power of attorney was validly recorded in Morgan County, to be valid, any revocation also had to be recorded in that county. To hold otherwise would undermine the purpose of the recording statutes.
In the alternative, David contends that the trial court erred in applying Kentucky law, rather than Pennsylvania law, to determine the validity of the power of attorney. He relies in part on an unpublished opinion of the Kentucky Supreme Court, Lykins Enterprises, Inc. v. Felix, 2007 WL 4139637 (Ky. 2007) (2006-SC-000142-DG, 2006-SC-000624-DG), which quoted with approval from Section 189 of the Restatement (Second) of Conflict of Laws (1971):
The validity of a contract for the transfer of an interest in land and the rights created thereby are determined, in the absence of an effective choice of law by the parties, by the local law of the state where the land is situated unless, with respect to the particular issue, some other state has a more significant relationship . . . to the transaction and the parties . . . .The Lykins Court observed that this doctrine had the advantage of giving "the forum having the most interest in the problem paramount control over the legal issues arising out of a particular factual context."
David argues that Pennsylvania has a more significant relationship to this case because the power of attorney was created and executed pursuant to Pennsylvania law, he was a resident of and domiciled in Pennsylvania prior to his incarceration in Kentucky, and the power of attorney was initially filed and revoked in Washington, Pennsylvania.
It is difficult to discern what interest Pennsylvania would have in the outcome of this case. By contrast, Kentucky has a considerable interest in and more significant relationship to the transaction and the parties. The mortgaged land is located in Kentucky, and Citifinancial extended the loan to Yvonne in reliance on a power of attorney validly filed in Kentucky. As the trial court observed, Yvonne resided in Kentucky and David's belongings were moved to Kentucky at his request while he was incarcerated. David is described as a resident of Kentucky in the power of attorney. Although he argues that he had no choice in this matter as he was incarcerated in Kentucky, the fact remains that he sold his property in Pennsylvania and purchased a farm in Kentucky, which strongly suggests he was planning to reside here permanently upon his release.
Moreover, even if we apply Pennsylvania law, we can find no convincing support for the view that Citifinancial had a statutory or common-law duty to investigate whether the power of attorney had been revoked. Pennsylvania law does not require a power of attorney to be filed in order to be effective.
Filing of power of attorney.--An executed copy of the power of attorney may be filed with the clerk of the orphans' court division of the court of common pleas in the county in which the principal resides, and if it is acknowledged, it may be recorded in the office for the recording of deeds of the county of the principal's residence and of each county in which real property to be affected by an exercise of the power is located. The clerk of the orphans' court division or any office for the20 PA. CONST. STAT. ANN. § 5602(c).
recording of deeds with whom the power has been filed, may, upon request, issue certified copies of the power of attorney. Each such certified copy shall have the same validity and the same force and effect as if it were the original, and it may be filed of record in any other office of this Commonwealth (including, without limitation, the clerk of the orphans' court division or the office for the recording of deeds) as if it were the original.
Pennsylvania law also expressly provides that "[a]ny person who acts in good faith reliance on a power of attorney shall incur no liability as a result of acting in accordance with the instructions of the agent." 20 PA. CONST. STAT. ANN. § 5608(b).
While those dealing with an agent are bound to look to his authority, yet it is equally well established that one clothing an agent with apparent authority is as to parties dealing on the faith of such authority conclusively estopped from denying it. An agreement by an agent in the course of the business entrusted to him is binding on the principal, although in excess of his instructions. Where one of two persons must suffer by the act of a third person, he who has held that person out as having authority in the matter should be bound by it.Fay v. Deady, 82 Pa. Super. 187 (Pa. Super. Ct. 1923) (internal citations omitted).
As we have already determined, there is no evidence that Citifinancial did not act in good faith reliance on the recorded power of attorney to extend the loan to Yvonne. Thus, David is bound by her actions.
Finally, David argues that the trial court erred in stating that David and Yvonne were joint owners of the Morgan County property. It is undisputed that the deed to the Morgan County property identifies David and Yvonne as joint owners. David contends that Yvonne never contributed any funds to purchase the property, was not his wife at the time of the purchase and did not have his permission to name herself as a joint owner. These allegations of fraud and breach of fiduciary duty are directed against Yvonne, not Citifinancial. The trial court's grant of summary judgment to Citifinancial did not dispose of the claims against Yvonne or adjudicate their merit. Should any of the claims against Yvonne be proven, the deed may be reformed. See McGowan v. McGowan, 243 S.W.2d 614 (Ky. 1951).
For the foregoing reasons, the summary judgment granted to Citifinancial is affirmed.
ALL CONCUR. BRIEFS FOR APPELLANT: John C. Collins
Jennifer L. Conner
Salyersville, Kentucky
BRIEF FOR APPELLEE
CITIFINANCIAL SERVICES, INC.:
Douglas T. Logsdon
Lexington, Kentucky
NO BRIEF FILED FOR APPELLEE
YVONNE STANLEY