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MEMORANDUM

Posted: February 13, 2013 02:28 PM
From: Senator Stewart Greenleaf
To: All Senate members
Subject: Powers of Attorney (Vine case)
 
Last session I introduced Senate Bill 1092 to address the State Supreme Court decision in Vine v. Commonwealth, 9 A.3d 1150 (Pa. 2010).  The case involved the statutory immunity afforded to third parties that act in good faith on the instructions of an agent pursuant to a facially valid power of attorney without actual knowledge that the power of attorney is void or voidable, has expired, or that the agent is exceeding the scope of his authority.
 
In Vine a woman suffered a stroke following an automobile accident and was unable to speak.  Four days after the stroke she purportedly executed a power of attorney in favor of her then-husband.  Her signature on the power of attorney consisted of an “X” marked on the appropriate line.  A nurse at the hospital signed as a witness and it was notarized.  A few weeks later the woman retired and her husband, as her agent, selected a retirement option for her that allowed him to make withdrawals but which paid her less than the disability retirement option.  If he had selected the disability option, the woman’s monthly benefits would have been greater but her accumulated deductions would not have been available to her husband for withdrawal.
 
A few years later, the woman’s husband filed for divorce and she discovered that she had not been retired on disability.  She asked the retirement system to change her election to the disability option but was denied.  Eventually the case made it to the Supreme Court which ruled that the Probate, Estates and Fiduciaries Code did not protect the retirement system from liability because the woman had lacked capacity to execute the power of attorney and, as a result, the power of attorney was not valid.  The Court stated that if the General Assembly had intended broader third party protection, it could have provided so.
 
While anyone reading the difficult facts of the Vine case would sympathize with the woman, the Court’s opinion removed the immunity third parties have had for decades in relying in good faith on facially valid powers of attorney.  The Vine case has caused great concern among attorneys who advise clients about and draft powers of attorney and third parties, primarily financial institutions that rely on the validity of the powers of attorney that are presented to them.
 
The legislation provides greater protection to third parties that act in good faith and should also provide greater comfort to principals, often elderly, who are in the position of naming an agent to handle their affairs.  Following discussions involving the Pennsylvania Bankers Association, Pennsylvania Bar Association and Pennsylvania Association of Elder Law Attorneys, the Senate amended and passed Senate Bill 1092.  In drafting the legislative response to the Vine case, provisions of the Uniform Power of Attorney Act were incorporated into Pennsylvania law.  In addition to addressing the Vine case, the amended legislation included provisions relating to the agent’s duties.  Generally, an agent must act in accordance with the principal’s reasonable expectations to the extent actually known and, otherwise, in the principal’s best interest.  The agent must act in good faith and only within the scope of authority granted in the power of attorney.  In addition, to the general duties, the amendment lists other duties of the agent that come into play unless otherwise provided in the power of attorney.
 
The legislation I am reintroducing is very similar to the bill that passed the Senate.
 


Introduced as SB620