Woman Accused By Siblings Of Using POA To Swipe Dying Father's Home; DC Court Of Appeals Orders Civil Trial On Allegations Of Forgery

A recent court ruling by the District of Columbia Court of Appeals may provide some insight for those who:

• find themselves in a situation where an individual uses a power of attorney ("POA") to improperly convey title to real property belonging to another, and
• seek to void/invalidate or otherwise undo the improper conveyance, and any transfers or mortgaging of the subject property occurring thereafter.

The abbreviated facts of the case, adapted from the ruling, follow:

• On November 4, 2005, a frail, seriously ill (with pancreatic cancer) Willie Smith purportedly executed a document naming his daugter, Mary Smith, as power of attorney.

• Eleven days later, asserting power of attorney for her father, Mary Smith purportedly executed a deed transferring title to the home of her dying father to herself for the consideration of ten dollars.

• The next day, Willie Smith died intestate and was survived by eight children.

• About one year later, in November, 2006, Mary Smith obtained a loan secured by a deed of trust (ie. mortgage) on her now-deceased father's home for $220,000.

• Subsequently, after Mary Smith defaulted on the loan, Wells Fargo Bank, which had come to hold the note secured by the deed of trust, foreclosed on the property and eventually purchased it at a foreclosure sale.

• At some point after the loan to Mary Smith and prior to the foreclosure sale of the home, Daral Smith, who is Mary Smith's brother and one of Willie Smith's surviving children, as well as several other siblings, sued both Mary Smith and Wells Fargo in a quiet title action, alleging that the conveyances to and from Mary Smith (and any conveyances following from them) were invalid because the power-of-attorney instrument did not authorize Mary Smith to convey the property to herself and because, in any event, the instrument was a forgery.

Ruling that there was no genuine issue of material fact to be determined that would require a trial, the lower court granted summary judgment in favor of Wells Fargo, (1) having stricken the affidavits that the brothers & sisters submitted to oppose summary judgment on the forgery issue, and (2) finding that Wells Fargo was a bona fide purchaser for value without notice of any defect in title (a "BFP").

On appeal, the District of Columbia Court of Appeals:

• affirmed the lower ruling that, given the specific facts of this case, Wells Fargo (the foreclosing lender who wound up holding the loan on the home) was entitled to the protection of the recording statutes as a bona fide purchaser; and

• reversed the lower court ruling on the forgery issue, saying that "the trial court erred in striking the affidavits that plaintiffs submitted in support of their forgery claim, and likewise erred in granting summary judgment, because the affidavits raised a material factual issue as to whether there was a forgery affecting the chain of title."

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The court reviewed the POA, the terms contained therein, the surrounding facts of the case, and the case law precedent that it applied. It observed that the underlying deed to Mary Smith and the deed of trust in favor of her mortgage lender would be void ab initio if the POA was a forgery, or if the POA was valid but Mary Smith exceeded the authority it gave her as attorney-in-fact when she conveyed the property to herself. It concluded that:

• the POA, assuming it wasn't a forgery, gave Mary Smith apparent authority (as opposed to actual authority) to convey the property as she did, and implied that in the event she did not have actual authority, the title conveyed would, at worst, be considered voidable (as opposed to void ab initio). In that case, Wells Fargo would be entitled to the protection of the recording statutes as a bona fide purchaser, which would preclude its deed of trust from being voided/invalidated by the court, and

• the POA, assuming it was a forgery, would result in Mary Smith's title and Wells Fargo mortgage being void ab initio, in which case Wells Fargo would not get bona fide purchaser protection and, accordingly, would be left holding the bag with a deed of trust that would be subject to being voided/invalidated by the court.

Accordingly, the D.C. Court of Appeals booted the case back to the lower court to allow for a trial to determine whether or not the POA purportedly given to Mary Smith by her father was a forgery.

For the ruling, see Smith v. Wells Fargo Bank, 09-CV-77 (D.C. Ct. of App., March 25, 2010).