When it comes to dealing with a power of attorney, it is important to note that the terminology used by the parties isn't controlling. In other words, for the debtor to simply state that a power is coupled with an interest in the power of attorney doesn't make it so. 3 Am. Jur. 2d Agency § 62; 28 A.L.R.2d 1243 § 2[c].
The requirements for the creation of a power coupled with an interest are:
· that the agency be held for the benefit of the agent not the principal;
· that the agency is created to secure the performance of a duty to the agent or to protect a title in the agent; and
· that the agency is created at the same time that the duty or title is created or is created for consideration.
In other words, merely declaring an agency irrevocable has no effect whatsoever in the absence of a power coupled interest, and merely asserting the existence of an agency coupled with an interest will not overcome the fact that the agent does not have an actual interest in the subject of the agency itself and not a mere interest in the result of the execution of the authority.
According to California courts, "the agency must be created for the benefit of the agent in order to protect some title or right in the subject of the agency or secure some performance to him. Monetary compensation, in whatever form it may take, does not create a power coupled with an interest so as to make the agency irrevocable."
Finally, keep in mind that given the unusual nature of a power coupled with an interest-in that it is not a true agency because the power is not controlled by the principal nor is it required to be exercised in the interest of the principal, the power is not merely revocable upon extinction of the interest, but is itself extinguished at the time the interest in the subject matter terminates. See, e.g., Bonfigli v. Strachan (2011) 192 Cal. App. 4th 1302, 1311-1312 (The Court found that when the holder of the power assigned its interest in an option which was the subject matter of the agency, the agent decoupled the power from the interest, thus extinguishing the power.) Although an irrevocable power of attorney may on its face appear irrevocable, chances are particularly, in the debtor/creditor scenario, it is more likely than not, revocable by law especially if used in conjunction with a transfer that can be attacked as fraudulent.
To discuss collecting a judgment, contact Los Angeles commercial collections attorney Ronald P. Slates today.