The lengths to which a judgment debtor will go to avoid collection is shocking to some, but not to an experienced commercial collections attorney. One tool not often used by the debtor, and challenging in its intricacies, is the irrevocable power of attorney, particularly when coupled with a charge of attacking the instrument as unenforceable. Irrevocable Powers of Attorney are a rare bird, and there are a few hurdles to get through in order to have a Court deem them unenforceable.
A power of attorney is a written document in which the principal gives a trusted person, or agent, the right to handle financial and property affairs on the principal’s behalf. In layman’s terms, an irrevocable power of attorney is a power of attorney that cannot be revoked by the principal.
The starting point of the analysis in determining whether the power of attorney is enforceable is checking what state law is applying to the power of attorney. If it is not a California power of attorney, a quick conflict of law evaluation is necessary. When there is a discrepancy between California law and the law of the chosen state of the parties, a conflict exists if there is a material difference between California law and the law of the chosen state. Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal. 4th 459, 477.
The commercial collections attorney must next make sure to review the statutory requirements for the actual form of the power of attorney, i.e., what must the power of attorney state in the writing. For example, New York has very specific mandatory language that must be in any power of attorney to be enforceable. The form of a power of attorney in California is generally found at California Probate Code Section 4120.
Essentially, powers of attorney are by their nature revocable, or capable of being cancelled. The real meat of an irrevocable power of attorney (meaning the court will uphold it as irrevocable), is that in order for a power to be irrevocable, it must be coupled with an interest. Power coupled with an interest means a power to do some act, delivered along with an interest in the subject matter of the power. When power is given to a person and that person derives a present or future interest in the subject over whom the power is to be exercised, it is considered a power coupled with an interest. Power coupled with an interest is not irrevocable due to the agent’s interest in the subject matter.
If you are dealing with a power of attorney issue relating to a judgment, contact experienced Los Angeles collections attorney Ronald P. Slates today.