{"id":482,"date":"2011-03-01T06:24:12","date_gmt":"2011-03-01T06:24:12","guid":{"rendered":"http:\/\/fresnoattorneyblog.com\/?p=480"},"modified":"2011-03-05T06:04:14","modified_gmt":"2011-03-05T06:04:14","slug":"bonfigli-%e2%80%93-don%e2%80%99t-press-your-luck-with-a-power-of-attorney","status":"publish","type":"post","link":"https:\/\/fresnolawyerblog.com\/?p=482","title":{"rendered":"Bonfigli \u2013 Don\u2019t Press Your Luck with a Power of Attorney"},"content":{"rendered":"

The decision in Bonfigli v. Strachan<\/strong> (Feb. 24, 2011) 2011 DJDAR 2893 is a reminder not to press for advantage when using a power of attorney.\u00a0 The defendant was a developer who used a power of attorney to reconfigure two parcels so that he got to keep the land, but did not have to pay the seller.\u00a0 Needless to say, the court of appeal was not amused.<\/p>\n

As part of its analysis, the court considered the rules applicable to a \u201cpower coupled with an interest,\u201d and based its decision on a Supreme Court case from 1823.\u00a0 Let\u2019s take a history lesson.<\/p>\n

Plaintiff owned two parcels on Sebastopol Road<\/a> in Santa Rosa.\u00a0 The defendant developer needed \u201cneeded the [plaintiffs\u2019] parcel in order to develop the overall project, and specifically, the \u2018Village Square\u2019 portion of the development.\u201d\u00a0 Defendant took an option to purchase the properties.\u00a0 In a critical fact, \u201cThe option expired on July 1, 2001, without being exercised.\u201d<\/p>\n

Here\u2019s where it gets interesting.\u00a0 \u201cIn May 2001, respondents filed a lot line adjustment<\/a> application with the City of Santa Rosa.\u201d\u00a0 Acting under a power of attorney, the developer executed the lot line adjustment on behalf of plaintiffs.\u00a0 According to the court, \u201cthe reason given for the lot line adjustment was to \u2018reconfigure lot line as desired by property owners.\u2019\u201d<\/p>\n

However, the reality was that \u201cthe requested adjustment decreased the size of the Bonfiglis’ front parcel by approximately 60 percent,\u201d with the acreage being transferred to a different parcel owned by the developer.\u00a0 Which is to say, the defendant took land from plaintiffs \u201cto create a buildable parcel [but] respondents did not pay the Bonfiglis for the transfer nor did they ever purchase the front parcel.\u201d<\/p>\n

Then, to rub salt in the wound, the developer encumbered the property with a $22.6 million loan.\u00a0 \u201cThe Bonfiglis’ parcel, among others, was used as collateral for the loan, with respondents signing as attorneys-in-fact for the Bonfiglis . . . even though the option had expired.\u201d\u00a0 This was followed, not surprisingly, by a bankruptcy filing by the entity that was being used to make the development.<\/p>\n

It seems astonishing that this case made it to a jury, and more astonishing that plaintiffs did not prevail (however, reversed on appeal).\u00a0 The critical issues on appeal involved a power of attorney signed by plaintiffs in 2000.<\/p>\n

Here the court used its wayback machine, stating that \u201cCalifornia decisional law has consistently followed the definition of a power coupled with an interest set out by Chief Justice Marshall in Hunt v. Rousmanier<\/em><\/a> (1823) 21 U.S. 174, 203: \u2018A power coupled with an interest,” is a power which accompanies, or is connected with, an interest.\u00a0 The power and the interest are united in the same person.\u2019\u201d<\/p>\n

\"Manhattan\"<\/a><\/p>\n

This isn\u2019t a traditional power of attorney.\u00a0 Its sui generis.\u00a0 \u201cThe purpose of a power coupled with an interest is to protect the agent’s interest in the subject and its value, this kind of power of attorney is not an \u2018agency\u2019 as that term is commonly understood.\u00a0 Rather, the creator of the power relinquishes irrevocably any authority to direct the attorney-in-fact who is permitted, under such an arrangement, to act solely in his own interests. \u201c<\/p>\n

This special kind of power of attorney does not create fiduciary obligations by the power holder in favor of his principal.\u00a0 Citing the Restatement Third of Agency<\/em><\/a>, section 3.12, the court explained that a “power given as security does not create a relationship of agency . . . The holder is not subject to the creator’s control and the holder does not owe fiduciary duties to the creator.”<\/p>\n

However, \u201cIf the creator grants the power to protect an ownership interest of the holder, the power terminates when the holder no longer has the ownership interest.\u201d <\/strong> For this reason, the developer was held liable for wrongful acts after its option had expired.\u00a0 \u201cThe powers granted to [the developer gave] them the power to use the land to develop the project.\u00a0 The interest being protected is the right to purchase the property at a specified price; and the value of that interest was secured by respondents’ ability to control the property for development purposes.\u201d<\/p>\n

Even more, the developer (Alan Strachan, who was represented by family member Gordon Strachan) was held personally liable for the injuries to plaintiffs because he directed his business entity to execute the lot line adjustment.<\/p>\n

Explained that court, \u201cRespondents [ ] cannot escape potential liability by using their business entity as a shield . . . Directors or officers are liable to third persons who are injured by their own tortious conduct regardless of whether they acted on behalf of the corporation and regardless of whether the corporation is also liable.\u201d<\/p>\n

Added the court, \u201cThis liability does not depend on the same grounds as \u2018piercing the corporate veil,’ on account of inadequate capitalization for instance, but rather on the officer or director’s personal participation<\/a> or specific authorization of the tortious act.\u201d<\/p>\n

In the end, justice was served.<\/p>\n

Bonfigli v. Strachan<\/strong><\/a> (Feb. 24, 2011) 2011 DJDAR 2893<\/p>\n","protected":false},"excerpt":{"rendered":"

The decision in Bonfigli v. Strachan (Feb. 24, 2011) 2011 DJDAR 2893 is a reminder not to press for advantage when using a power of attorney.\u00a0 The defendant was a developer who used a power of attorney to reconfigure two parcels so that he got to keep the land, but did not have to pay […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,8,9],"tags":[],"class_list":["post-482","post","type-post","status-publish","format-standard","hentry","category-case-law","category-real-property","category-trusts-and-estates"],"_links":{"self":[{"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=\/wp\/v2\/posts\/482"}],"collection":[{"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=482"}],"version-history":[{"count":1,"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=\/wp\/v2\/posts\/482\/revisions"}],"predecessor-version":[{"id":486,"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=\/wp\/v2\/posts\/482\/revisions\/486"}],"wp:attachment":[{"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=482"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=482"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fresnolawyerblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=482"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}